JANUARY TREND:
The electronics sector could lead the overall market higher, but a technical pullback is expected as TAIEX approaches 20,000 points, an analyst said.

After a sharp rise in TAIEX last year, market sentiment turned bullish, likely causing a “January effect” and sending the main draw higher, dealers said over the weekend.

The January effect refers to a seasonal rise in the market after foreign institutional investors returned to the trading floor after the New Year holidays.

TAIEX could climb 1,500 to 2,000 points and reach 20,000 this year, said Alex Huang (黃國偉), director of Mega International Investment Services Corp (兆豐 國際 投 顧).

Photo: ANC

While economic growth and increased corporate profits are expected to be moderate this year due to last year’s relatively high baseline, the impact of the COVID-19 pandemic and a global shortage of chips could weaken, Huang said.

The benchmark electronics sector could lead the market as a whole to the upside, benefiting from the January wave of the effect, he said.

However, Huang said that as TAIEX approaches 20,000 points, it is likely to experience a technical pullback of 10 to 15%.

TAIEX rose 3,486.31 points, or 23.66%, from the end of 2020 to close at 18,218.84 points on Thursday, the last trading session of last year. This was the third highest growth in the history of the main board.

Although foreign institutional investors sold a net NT $ 454 billion (US $ 16.4 billion) of shares in Taiwan last year due to concerns over COVID-19, lingering tensions between the United States and China and a move by major central banks – especially the U.S. Federal Reserve – to tighten monetary policy, local investors rushed to fill the void, driving the TAIEX higher throughout the year, dealers said.

Shin Kong Investment Trust Co (新光 投信) chairman Quincy Liu (劉坤錫), who also expects the January effect to occur, said he favors semiconductor stocks.

Investors should pay special attention to Taiwan Semiconductor Manufacturing Co (TSMC,) and the company’s suppliers, he said.

Mainly, the tech sector received a boost from spin-off purchasing in the second half of last year, led by TSMC, Liu said.

Rotational buying is expected to dominate the main board, with suppliers of chemical raw materials and financials likely to benefit from the trend, he said.

Allianz Global Investors Taiwan Technology Fund (安 聯 台灣 科技 基金) manager Peter Liao (廖哲宏) said investors should pay attention to the outlook of key technology companies when they hold their earnings talks in the middle. of this month.

Allianz maintains a positive outlook on the semiconductor industry and expects the chip shortage to continue through the first half of this year, Liao said.

Sales in the semiconductor industry this quarter are expected to challenge the industry’s historical model with better-than-expected results, although this quarter has been a traditionally slow season for the industry, he said.

However, spot memory chip prices have rebounded recently, and coupled with China’s Xian lockdown, the short-term supply of memory chips is likely to become tight, further supporting chip prices, Liao said.

Overall, a good start to the tech company reporting season would support the stock market in the first quarter, he added.

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