Taiwan stocks' bull run seen coming to a halt as rates increase

[TAIPEI] There's little room left for further gains in Taiwan equities this year as central banks tighten, according to a survey.

The benchmark Taiex may rise to as high as 11,500 before ending the year at 11,000, barely changed from the current level, according to the median estimate of 12 analysts, fund managers and traders. Half picked rising interest rates and net outflows as the main risks to the local market. Taiwan's stock gauge surged 15 per cent last year, its best performance since 2009, helped by a global technology rally and US$6.1 billion of inflows.

As always in a stock market heavily skewed toward Apple suppliers, performance may pivot on the success or failure of iPhone sales.

Taiwan Semiconductor Manufacturing, which reports earnings next week, and Hon Hai Precision Industry account for almost a quarter of the Taiex's overall weighting.

"There might be a de-rating of iPhone suppliers," said Hua Nan Securities vice-president David Lu. This was because "new models coming up this year may not offer huge upgrades or new features."

Traders were divided in the survey, with three respondents naming disappointing iPhone sales as presenting a risk for investors, and four saying Apple suppliers were among their favourite sectors. While TSMC shares trade near a record, Hon Hai has tumbled 25 per cent from its June peak.

Taiwan's central bank will increase borrowing costs this year for the first time since 2011, an earlier survey found, while gains in the local currency will likely peter out, according to another.

The Taiwan dollar rose to its highest level in four years on Jan 5. Investors will soon find out whether the currency's strength is weighing on exporter earnings when TSMC announces its results on Jan 18.

E Sun Investment Consulting was the most bullish in the survey, predicting the Taiex would end 2018 at 12,500 - surpassing the record closing level set in 1990. Fubon Securities Investment Services was the most bearish, forecasting 10,000.

Among the survey's other findings: The Taiex will end the first quarter at 11,000 and peak this year at 11,500 in the first half Automobile electronics and electric-car component suppliers topped the list of favored sectors, picked by nine survey participants.

BLOOMBERG