Hon Hai removed from Morgan Stanley's list of 'buys'
By John Liu ,The China PostTAIPEI, Taiwan -- As Taiwan possesses more advantages over emerging countries, its stock market is expected to hike to 8,850 points this year, according to a report released by Morgan Stanley yesterday.
February 21, 2014, 12:06 am TWN
In the new report, the financial services firm recommends non-Apple concept electronics stocks, non-electronics bellwether stocks and financial stocks. Morgan Stanley added six companies to its recommended list of buys: Asus (華碩), St. Shine Optical (精華), MediaTek (聯發科), Formosa Plastic (台塑), E. Sun Financial Holding (玉山金) and Yuanta Financial Holdings (元大金).
In addition, the company removed four companies from the recommended list of buys: Hon Hai Precision Industry (鴻海), Mega Holdings (兆豐金), Catcher Technology (可成) and China Life (中壽).
Taiwan holds an edge compared with many developing nations, the report says, such as the fact that the return on investment (ROE) is on an upward growth trend, chances are low for local firms' profit to drop, political risks are low, corporate governance is good and local companies also maintain close trade relations with foreign firms in developed countries.
Technology Stocks Look Promising
The financial services firm has yet to see stimulus that may drive long-term growth for electronics stocks, and said that any positive effects related to Apple concept stocks may not surface until mid-third quarter. As such, Morgan Stanley recommends investors buy stocks that are not related to the high-tech industry or Apple concept stocks.
Technology stocks outperformed financial and non-technology stocks over the past three months. According to Morgan Stanley, this growth was driven by a strong hardware sector as well as the market's expectation of new Apple products.
Foreign investors threw in NT$7.7 billion in the stock market on Wednesday, which was the fourth consecutive day foreign investors placed more purchases than sells. A total of NT$26 billion was thrown in the market over the four-day period. This surge was mainly driven by technology stocks, Morgan Stanley said, adding that the momentum is unlikely to recede in the near future.
Biotech and Auto Stocks Picked
Morgan Stanley pointed out that biotechnology and automobile stocks look promising in the long run. Financial stocks are expected to generate profit in the second quarter. As prices of these stocks recently fell to lower ranges, they may be considered prime targets.
According to a European-based securities firm, global stock markets saw fluctuations after the Chinese New Year. Some stock holdings in Taiwan were sold to meet the new situation. However, stock holdings are now being purchased back. So long as the global stock market does not crash, the company will continue to purchase back stock holdings in the short run.