Taiwan Stks Attractive, Mkt Rated Overweight - Goldman
TAIPEI (Dow Jones)--With Taiwan's stock market having underperformed other regional bourses over the past three months, share prices have fallen to attractive levels, Anand Aithal, regional strategist at Goldman Sachs, said Thursday.
"If you look at history, this market, certainly on a (price/earnings ratio) basis, is right at the bottom of where it has traded over the past decade," Aithal said. "The market very rarely goes below 15 times forward earnings and this is exactly where we are today."
Aithal said Goldman, which last week raised its rating on Taiwan stocks to overweight, expects the market to trade in the 8,000-10,500 point range.
He also noted that the risk premium being priced into Taiwan stocks is excessive, with it being as high as it was during the Asian financial crisis and during the missile crisis of 1996.
"The key point is, the underlying earnings and economic environment are still good," Aithal said. "And, in addition, compared to some other countries in Asia, Taiwan's political problems are very small."
Taiwan stocks would be trading at fair value at around 10,500 points, he added.
Aithal said that more mergers and acquisitions and more deregulation would be needed for the market to break through that level.
The Goldman strategist also said that he remains upbeat about Taiwan's semiconductor industry and noted that the sector isn't even half way through the current industry upturn.
"If you look at the past 30 years, the average length of the semiconductor cycle has been five years and we are two years into the current cycle," Aithal said, noting that the greater number of products using chips is keeping demand strong. |
