Taiwan stocks quiet now; 4th quarter rally expected

The asset management firm held on to the view Taiwan stocks will reach a high of 7,500 this year, despite yesterday's stock market rout.

All 28 industry groups on the TAIEX fell, driving the gauge down 3.5 percent to 6,225.56 at the close, the biggest decline in eight weeks.

Participants of yesterday's forum said in the short-term, Taiwan stocks will take a rest, as foreign institutional investors who have helped boost the TAIEX index past 7,000 points from last year's nadir of 3,955 are ready for their traditional summer vacation.

For the second half, analysts will carefully observe whether companies have benefited from improvements in cross-strait ties, they said.

UBS's forum yesterday was somewhat low-key compared to the one held by Merrill Lynch back in March. However, it has been a drastic three-month period as the TAIEX had experienced a roller coaster ride.

The index had at one point surged past 7,000, thanks to improved cross-strait ties and the opening of the island to mainland capital. Yet, since last week, the TAIEX began a decline trend, as profit-taking by investors contributed to a correction of Taiwan stocks.

According to UBS, Taiwan's manufacturing sector has shown signs of recovery, despite the lingering global recession. Based on its observation, Taiwan has already seen its bottom and will slowly improve in the second quarter, it said.

Better cross-strait ties and an influx of mainland capital will serve as long-term incentives for Taiwan stocks, UBS said.

President Ma Ying-jeou's first year in office has been marked by improving relations with China after he abandoned his predecessor's pro-independence stance.

The two economies on April 26 signed agreements to increase direct flights, boost financial cooperation and work together on crime prevention.

The statistic bureau recently said it expects an average 3,000 Chinese tourists a day, each with a daily spend of US$237, adding in total of 0.4 percentage point to GDP in 2009.

Yesterday's forum featured representatives from the electronic and banking sectors. Besides a keynote during noontime, the rest of the forum was in the format of one-on-one meetings between business representatives and UBS clients, allowing them to have face-to-face conversations with entrepreneurs to get a sense of what's going on.

UBS also named some of its recommended stocks, including Chinatrust, HTC, Lite-On and Taiwan Semiconductor Manufacturing Co., and set their target prices of NT$21.9, NT$545, NT$34 and NT$65, respectively.

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