Taiwan Shares May Fall 15% in 2010 on Yuan, CLSA Says (Update2)
May 03, 2010, 3:17 AM EDT
By Weiyi Lim and Haslinda Amin
May 3 (Bloomberg) -- Taiwan’s benchmark stock index may fall 15 percent this year as a move by China to allow its currency to rise hurts the competitiveness of the island’s manufacturers in the country, CLSA Asia-Pacific Markets said.
Taiwan’s Taiex index may drop to 6,800 by the end of the year, led by technology companies and manufacturers with operations in China, according to Nicholas Teo, head of research for CLSA. The measure slid 0.7 percent to 7,952.17 at the close in Taipei, extending the decline this year to 2.9 percent.
“Most of Taiwan’s manufacturers have production bases in China,” Teo, who became head of the research team in January, said in an interview today in Bloomberg’s Taipei bureau. “That would add pressure to the costs and potentially squeeze the margins.”
CLSA Asia-Pacific Markets, third-ranked by both Asiamoney and Institutional Investor for its Taiwan coverage, expects the yuan to rise by an annualized 5 percent to 7 percent per year, Teo said.
Compal, Hon Hai
Compal Electronics Inc., the world’s largest laptop maker which plans to invest $180 million to expand its China production site, dropped 1.5 percent to NT$43.20, the most since April 19. Hon Hai Precision Industry Co., the world’s largest electronics maker with about 600,000 workers in China as of March last year, dropped 1 percent to NT$147.
Taiwan’s exporters may also be hurt by a strengthening of the island’s currency, Teo said. The Taiwan dollar may rise a further 0.7 percent to NT$31.20 by the end of the year as it lagged behind other Asian currencies, he said.
The Taiwan dollar’s 1.9 percent gain so far this year is the third-worst among the 10 most-actively traded currencies in Asia excluding Japan.
Taiwan’s consumer companies, such as retailers, will benefit most from the yuan appreciation, Teo said. He declined to name individual stocks.
The TWSE Food Index, which tracks 20 food-related companies, rose 0.5 percent, the most among 28 industry groups on the Taiex.
Relations between China and Taiwan have warmed since Ma Ying-jeou took office as the island’s president in May 2008 and dropped the pro-independence stance of his predecessor, Chen Shui-bian. China and Taiwan have been ruled separately since a civil war six decades ago.
--Editors: Linus Chua, Richard Frost
May 03, 2010, 3:17 AM EDT
By Weiyi Lim and Haslinda Amin
May 3 (Bloomberg) -- Taiwan’s benchmark stock index may fall 15 percent this year as a move by China to allow its currency to rise hurts the competitiveness of the island’s manufacturers in the country, CLSA Asia-Pacific Markets said.
Taiwan’s Taiex index may drop to 6,800 by the end of the year, led by technology companies and manufacturers with operations in China, according to Nicholas Teo, head of research for CLSA. The measure slid 0.7 percent to 7,952.17 at the close in Taipei, extending the decline this year to 2.9 percent.
“Most of Taiwan’s manufacturers have production bases in China,” Teo, who became head of the research team in January, said in an interview today in Bloomberg’s Taipei bureau. “That would add pressure to the costs and potentially squeeze the margins.”
CLSA Asia-Pacific Markets, third-ranked by both Asiamoney and Institutional Investor for its Taiwan coverage, expects the yuan to rise by an annualized 5 percent to 7 percent per year, Teo said.
Compal, Hon Hai
Compal Electronics Inc., the world’s largest laptop maker which plans to invest $180 million to expand its China production site, dropped 1.5 percent to NT$43.20, the most since April 19. Hon Hai Precision Industry Co., the world’s largest electronics maker with about 600,000 workers in China as of March last year, dropped 1 percent to NT$147.
Taiwan’s exporters may also be hurt by a strengthening of the island’s currency, Teo said. The Taiwan dollar may rise a further 0.7 percent to NT$31.20 by the end of the year as it lagged behind other Asian currencies, he said.
The Taiwan dollar’s 1.9 percent gain so far this year is the third-worst among the 10 most-actively traded currencies in Asia excluding Japan.
Taiwan’s consumer companies, such as retailers, will benefit most from the yuan appreciation, Teo said. He declined to name individual stocks.
The TWSE Food Index, which tracks 20 food-related companies, rose 0.5 percent, the most among 28 industry groups on the Taiex.
Relations between China and Taiwan have warmed since Ma Ying-jeou took office as the island’s president in May 2008 and dropped the pro-independence stance of his predecessor, Chen Shui-bian. China and Taiwan have been ruled separately since a civil war six decades ago.
--Editors: Linus Chua, Richard Frost