Russia’s invasion of Ukraine has disrupted the bullish momentum in financial stocks, while the pace of US Federal Reserve interest rate increases and global supply chains adapting to the post-COVID-19 period is expected to continue to affect Taiwanese equities, Allianz Global Investors Taiwan Ltd (安聯投信) said on Friday.
“Concerns over default on Russian sovereign debt and expectations of a slower pace of Fed interest rate adjustments [in light of the Ukraine-Russia war] are unfavorable for the performance of financial stocks,” the company’s Taiwan equity research team said in a note.
Taiwan Stock Exchange (TWSE) data showed that the main bourse’s financial and insurance subindex retreated 3.03 percent last week, reflecting the poor performance of financial sector shares.
Photo: CNA
The exposure of Taiwanese banks, insurers, securities firms and individual investors to the Ukrainian and Russian markets totaled NT$217.9 billion (US$7.78 billion) as of the end of last month, the Financial Supervisory Commission said on Friday.
The nation’s exposure to the two markets was relatively small compared with other countries, the agency said.
As for electronics stocks, Allianz strategists said that the market remains worried about potential adverse effects of supply-demand changes on price and inventory adjustments.
The short-term performance of stocks in the sector largely depends on the respective company’s financial results for the fourth quarter of last year, they said.
So far, traditional industry stocks seem to be safer bets, with investors moving more assets to the sector, Allianz said, adding that stocks of firms in the transportation and steel sectors are performing better than other traditional industry stocks.
The strategists said that in volatile times, investors increasingly favor stocks with medium to long-term growth potential, such as in the high-performance computing, artificial intelligence, servers and electric vehicle sectors.
Shares of semiconductor companies with higher order visibility might also benefit, as investors’ worries over slim inventory have made the stocks quite cheap, Allianz said.
The strategists’ advice came after the TAIEX on Friday closed 0.33 percent higher at 17,652.18 points on a technical rebound, following a 2.55 percent fall in the previous session.
The TAIEX dropped 3.18 percent for the whole of last week, while it has so far this year retreated 3.11 percent, TWSE data showed.
Foreign institutional investors continued to stand on the sell side to unload local equities on Friday, selling a net NT$51.03 billion of shares on the main board, TWSE data showed.
In the week, foreign institutional investors sold a net NT$166.54 billion of local shares after selling a net NT$6.31 billion a week earlier, the exchange's data showed.
The most actively traded stocks last week were semiconductor shares with a total turnover of NT$492 billion, followed by shipping stocks at NT$455.5 billion and electronic component stocks at NT$145 billion, the data showed.
Additional reporting by Kao Shih-ching
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