Tall buildings are spread across Taiwan’s capital, Taipei.
Ratima Sritangong | EyeEm | Getty Images
The Taiwan-weighted index hit an intraday high of 20,296, according to FactSet data. That could go as high as 24,000 before the year is out, according to Paul Yu, chairman of First Securities Investment Corp.
You said global demand for AI has been strong in the last two to three months and is “very promising”. Asia Pacific’s tech sector is expanding on the back of a semiconductor boom even as other industries struggle amid global macro uncertainty.
This is setting the stage for an economic boom for the island, which you say has the “strongest supply chain for AI service manufacturing”.
I would expect a very strong year, in terms of the stock market, and also that we are expecting cuts from the Fed.
Alicia Garcia Herrero
Natixis’ Chief Economist for Asia Pacific
Chip giant TSMC, the primary contract chip maker for Nvidia, has surged more than 30% so far this year, benefiting from Nvidia’s performance and capacity. TSMC is the largest component of Taiex.
Shares of equipment assembly firms in Taiwan such as Quanta Computer and Westron Corp. also rose by more than 14 percent and 24 percent, respectively, according to LSEG data.
Alicia García-Herrero, Natixis chief economist for Asia-Pacific, said another reason for the rally in Taiwanese stocks is the increase in fixed-asset investment since the end of the election in January, which has created some uncertainty. was given He also said AI will fuel the boom rally.
“I would expect a very strong year, in terms of the stock market, and also that we are expecting cuts from the Fed,” he added.
A Fed cut generally offers a lift to equity markets as lower interest rates mean cheaper borrowing costs for businesses and individuals.
See the chart…
The Taiwan Stock Exchange hit new highs.
Moving away from the focus on superstar sectors like semiconductors and AI, you also said some domestic sectors such as Taiwan’s precision machinery, automation technology and consumer sectors are undervalued.
Some rotation may be needed in these sectors to push the benchmark index to new all-time highs, he added. Sector rotation involves the transfer of money from one industry to another in anticipation of the next phase of the economic cycle.
“So I believe that if we [are] Marching up to 24,000, you need to add some sector rotation,” he said.
Goldman Sachs said in a recent note that despite strong headline index performance, Taiwan’s “market breadth remains tight” as less than half of Taiwan’s stocks have delivered positive returns year-to-date.