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TAIEX to hit 10,500 points: Goldman Sachs

TAIPEI--The Taiwan Stock Exchange Weighted Index (TAIEX) could hit 10,500 points within 12 months on the back of an improving bottom line among locally listed companies, according to U.S. brokerage Goldman Sachs.

The brokerage said that Taiwanese businesses listed on the main board could enjoy a 14 percent year-on-year increase in profits in 2014 followed by an 18-percent increase in 2015 to serve as a driver to a higher equity market.

On Friday, the weighted index fell 0.16 percent to 9,510.05 points on a mild correction after the index breached the 9,500 point mark a session earlier. So far this year, the local bourse has gained about 10.4 percent on liquidity-driven buying.

Goldman Sachs said compared with other countries in the region, Taiwan has a healthy current account and the Taiwan dollar has a competitive advantage over other regional currencies. The brokerage has issued an “overweight” recommendation on the local equity market.

It has also issued an “overweight” rating on the markets in China and India.

Goldman Sachs said that although the United States, which is one of the largest markets for Taiwan, reported a 2.9 percent contraction in gross domestic product for the first quarter, its economy will recover over the rest of the year to boost GDP growth to 2.9 percent for the entirety of 2014. Europe is also on the way to recovery, it said.

The favorable external factors will benefit Taiwan's export- oriented economy, giving a boost to local exporters' profitability, Goldman Sachs said.

The brokerage said it favors the bellwether electronics sector, in particular semiconductor makers and local suppliers to Apple Inc., for which it gives an “overweight” recommendation on expectations they will lead the broader market to move higher in the third quarter.

In the non-high tech sector, Goldman Sachs said it prefers insurance stocks which have lagged behind the broader market.

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