In spite of recent declines, the local stock market (TAIEX) is set to rise significantly in years to come, analysts told Barron’s magazine.
“We’re not at the end of the run and we could still see a surge in market levels,” the magazine quoted Peter Kurz, Citigroup’s strategist in Taipei, as saying in a report titled “Too Hot in Taiwan?” to be released today.
“The new normal for the next five years will be closer to 18 times [price to earnings ratio] than 12 times. I don’t think [the market’s] overvalued. It could rise significantly,” he added.
Yu Reming, chief investment officer at Prudential Financial Securities 保誠投信) in Taipei, also said that he believes a reduction in cross-strait tension means stock prices, now trading at 2.5 times book value, could rise to three times, the report said.
The Chinese-language Economic Daily News yesterday further reported that Kurz, in his note to clients titled “Liqudity Tailwind, Earnings Headwind,” favored downstream industries in the high-tech sector over upstream suppliers.
The analyst agreed the local bourse’s momentum will be further strengthened once the nation signs a memorandum of understanding and an economic cooperation framework agreement with China.
Bolstered by ample liquidity, the TAIEX will continue to go up, the report said.
He also put an overweight on shares of the nation’s state-owned banks over those of private banks, the report said.
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