The Taiwan Stockmarket

Business Money
1

From the Motley Fool

[quote]
There are markets that are still cheap, though. My January stock selection for Global Gains came from the one I think investors have undersold for years and years: Taiwan.

The little dragon still throws flames
Because it lacks diplomatic relations with much of the world and has been embroiled with mainland China in conflict for nearly six decades, investors seem to believe that Taiwan is a has-been, a market that is going to be subsumed by its bigger Chinese neighbor. But people don’t seem to realize that the world’s high-tech industry is almost totally dependent on Taiwan, with its big foundries run by monstrously profitable companies such as TSMC (NYSE: TSM), the former Taiwan Semiconductor. Taiwanese companies also have invested more money into China than those from any other in the world.

Think they’re going to get eaten up by China? Heck, no! China runs on Taiwanese capital, and Taiwanese companies are uniquely culturally adept in fording the difficulties of the Chinese market. Taiwan has gone from being a manufacturing center to one that uses its capital and intellectual property , so they’re not spending capital to build high-cost plants in Taiwan. Yet the Taiwanese stock market trades at little more than 13 times earnings, and it pays dividends close to 4%. Yet no one’s looking there. Strange. [/quote]

A Taiwanese friend sent me this article. I’m wondering though… 70% of GDP in Services? What services are those? Is BenQ now considered a services company just because it outsourced its manufacturing to the Chinese?

As far as I was aware Taiwan’s economy consists primarily of Engineering companies, in plastics and electronics…

Not only that, it sits somewhere behind Japan and Korea and the US in terms of brand recognition and quality, yet still more expensive that Chinese manufacturers who are busy trying to build their own brands. Its like being squeezed from both sides.

Also, just because you can finance the operations, that doesn’t necessarily make them profitable. The Taiwanese may provide the majority of investment in China, but has it paid off?

Also, if the Taiwanese economy is very much dependent on foreign markets (like the US), rather than internal, then perhaps thats why the P/E ratio’s are generally lower.

I’d like the view of some of the other Forumosan’s particularly those in the investment field, but also those involved in manufacturing.

2

Two quick thoughts:

Taiwan electronics manufacturers can be characterized as service companies because they provide manufacturing and logistics services to their customers.

As for undervalued, Taiwan has dramatically underperformed regional markets over the past couple years, prompting some to say Taiwan will ‘catch up.’

I don’t have a particularly strong view either way …

3

And we are in an effort to raise the quality and brand recognition . Some are even better than Korea and Japan.We are making progress.

Compared to Asia’s market,Taiwan’s stock market is truely undervalued .
And the growth was less than the others in the recnet years.
That is the reason to think it is the time to rebound.
And this year,because the appreacition of RMB,and the coming of Olympic next years,and
Vista,Wii,Iphone,wimax which make Taiwan’s Stock market is noticable.
It will have ,at least,20% growth this year.

Taiwan not only has invested in China but also in the other emerging countries.Like Vietnam.
So the risk wont be that much which it is good for the market.

In fact,there is another good issue for Taiwan 's stock market.
That is merger proposal is undergoing for some companies.

4

I know P/E isn’t everything but at an average of around 16.5 it doesn’t sound undervalued to me, more like a fair value.

5

I am curious how many of you invest in Taiwan stockmarket?

6

So, with the indictment of Ma, can we expect the TAIEX to drop heavily tormorrow (13. Feb.), and what investment opportunities would that open for?

Is there an index to invest in for peple like me, who don’t follow the market closely?

7

Good question. It really could go either way. The fact he announced his presidential run may actually encourage some buying tomorrow. The foreign money is very eager to see closer ties with China, so any hint Ma is in to win would be a buy signal. The preferred plays on this theme are property holders.

There are ways. Some brokerages or possibly banks offer a bundle of stocks you can buy as a package. In this way you are playing the market, or a theme, more than the individual stocks.

HG

8

[quote]X3M wrote:
So, with the indictment of Ma, can we expect the TAIEX to drop heavily tomorrow (13. Feb.), and what investment opportunities would that open for?

Good question. It really could go either way. The fact he announced his presidential run may actually encourage some buying tomorrow. The foreign money is very eager to see closer ties with China, so any hint Ma is in to win would be a buy signal. The preferred plays on this theme are property holders.
[/quote]
Yes.Ma announced his Prsidential run may actually encourage some buying tommorrow.
And the “Zhong guo gai nian stocks” may a best buy.

9

ishares MSCI Taiwan Index Fund

10

Thanks for your input and opinions. It seems I was wrong, and HGC and wisher were correct about the market reaction.
I always have taken it for given that Ma would be the presidential candidate, and the market already had taken this “fact” into account.

11

I buy into a lot of mutual funds offered by HSBC. They don’t only offer their own funds, but also Merril Lynch, Fidelity, JP Morgan, Invesco etc. For taiwan, I like the HSBC Success Fund which had done quite well. I’m also tempted to invest in the Fidelity Japan Fund in Yen as I can see both the Yen strengthening and the Nikkei doing quite well, after a horrible year last year.

HSBC funds about 1.5 % entrance fee, others 2%. 500nt a switch

12

Japan didnt plan to raise interest for a short term.
Yen is not going to be stronger.
Actually,my Japanese fund is the only one I lost money. :frowning:

13

that’s the contrarian in me! I’m taking a year long view. I don’t think the Nikkei or Yen will be lower in a year’s time.

14

I think Nikkei will be better than 2006 but not yen.
I maybe wrong about Yen.I have a lot to learnI know.

15

I am looking forward to next monday’s coming.
I hope it has the good begining .
Since the US inflation is a worrying and Japanese Yen is weaker to EUR today.
What it will affect to the stockmarket?
But the Olympic is a good issue for the market ,too.
How do you think ?

16

from Bloomberg.

Japanese Stock Market Is a `Long-Term Bull’, Says CLSA’s Wood

By Patrick Rial

Feb. 26 (Bloomberg) – Japan’s stock market will continue to rise, driven by domestic demand-related shares as higher interest rates boost the disposable incomes and spending of consumers, said Christopher Wood, CLSA Ltd.'s Hong Kong-based global equity strategist.

The equity market remains in a long-term bull market,'' said Wood, speaking today at CLSA's 2007 Japan Forum in Tokyo. Japanese incomes will be positively affected by rising interest rates’’ because of the high level of savings in bank deposits.

More than half of Japanese individuals’ savings are in currency and deposits, according to CLSA, which used data from the Bank of Japan. Interest income, which Wood said ``collapsed’’ during the previous six years, will rise as banks lift deposit rates and lead to higher consumption at home.

Increased spending will result in higher profits for domestic demand-related companies such as lenders and real- estate companies, he said.

The Topix index has more than doubled since the beginning of 2003, while the Nikkei 225 Stock Average has gained 112 percent. Both measures have posted gains in each of the last four years, the longest winning streak in 17 years.

Wood’s model portfolio consists of lenders including Mizuho Financial Group Inc., the nation’s second-largest bank, property developers such as Sumitomo Realty & Development Co., Japan’s No. 3 real estate developer, and retailers such as Parco Co.

The Bank of Japan lifted borrowing costs 0.25 percentage point to 0.5 percent last week, the first increase since July.

`Good Deflation’

The central bank should not focus on weak consumer price index numbers in deciding monetary policy, because they do not reflect the strength of the Japanese economy, according to Wood. Lower prices no longer point to a worsening economy, but rather to a more liberalized market that is pushing prices lower.

Consumer prices excluding fresh food, the BOJ’s main gauge of inflation, rose 0.1 percent in December from the previous year. Prices were flat in January, according to the median estimate of economists in a Bloomberg survey. The government will release the inflation report on March 2.

The fact that core CPI is negative, or nearly negative, now no longer reflects bad deflation stemming from bad debt,'' said Wood, 44. This increasingly reflects good deflation. I’ll give you two examples; deregulation of electricity tariffs and competition in mobile telecom rates. And this good deflation is not a negative, it’s a sign of supply-side reform and shouldn’t be influencing Japanese monetary policy.’’

The BOJ will eventually succeed in bringing interest rates up to 2.5 percent to 3 percent, which will boost bank shares as their loan margins improve, Wood said. Banks are also increasing fee revenue from mutual fund sales and may expand into consumer finance now that companies in that industry have been hit by various scandals, he added.

Wood argued now is a good time for foreigners to buy Japanese shares because the yen will eventually strengthen as interest rates increase and should world governments step up complaints about the weak currency. That will produce currency gains over and above stock market returns, Wood said.

Incidentally -anyone been keeping an eye on those european smaller companies funds. They’ve been up for so long, most over 100% in three years and I’m tempted to get involved but at the same time wary that whoever comes to the party late, gets the biggest hangover!

17

Let’s hope they’re right about Japan rising.
That’s the only fund where I’m losing money, about 20 percent down, and it’s just not moving up.
On the other hand, I bought JF India just before the election there - about 2 or almost 3 years ago. The fund was at 60 US a unit then, now it’s running at about 160. That looks like I should sell and cash in, but India is really the country in the world I’m most optimistic about, so I want to hang on and see if it goes any higher.