Taiwan is currently the worst performing market in the Far East region, according to Helen Fallow, i...
Taiwan is currently the worst performing market in the Far East region, according to Helen Fallow, investment manager on the Far East ex-Japan desk at Britannic Asset Management.
After an initial strong few weeks at the start of the year, the Taiwan Weighted Index is down 21.20% in sterling terms over the year to 16 October 2001.
'The Taiwan market and economy is heavily geared into technology, so it has been under a lot of pressure this year,' says Fallow.
'Since the second quarter, earnings have been marked down so there has been a lot of earnings disappointment over the last few months.'
The Taiwan Weighted Index peaked towards the end of February 2001 at 6,100 points but by 15 October it was at 3,712. Fallow says this fall is largely because of its exposure to technology, with a substantial number of the country's exports being PC related.
Kirsteen Melandri, executive director at Threadneedle, says another reason for the difficulties in Taiwan is the weakness of its domestic economy.
'While Taiwan and Korea both suffer from weak export levels, Korea has a buoyant domestic economy due to private consumption, which Taiwan does not,' she says. 'Korea is also further down the line in the reconstruction of its banking sector, while has not yet addressed its banking problems.'
Fallow adds that there is no real lending going on in Taiwan because of the global economy situation, with not many people wanting to borrow because of the asset quality concerns.
Melandri says that while Taiwan is not their most favoured market in the Far East, it is cheap relative to its history and when the economy does move it will go up very fast, so it is a market she watches very closely.
Fallow says: 'Taiwan is geared into a global economy recovery.'
'The index has hit 3,500 a couple of times, which we believe is roughly the bottom. For it to pick up we need to see an improvement in the global economy and in technology. We do not see this happening until the second half of next year. However, the market has factored in many of these concerns, and we expect things into next year to look better.'
The best performing stock in the Taiwan Weighted Index over the year to 16 October was EliteGroup Computer Systems, which returned 272.58%. This company designs, manufacturers, and markets computer motherboards, pre-systems, interface cards, CD-ROM, and peripheral equipment.
The best performing sector in Taiwan over the same period was the chemical index, which returned -3.46% in sterling terms against the overall index return of -21.20%. The electronics index just managed to outperform the general index with a return of -17.80%. The worst performing sector for the year to 16 October was transport, returning -44.94%.
'The short position in Taiwan is at a three-year high,' says Melandri. 'The banking system issue can be a drag medium term, but the economy will react well to any upturn in demand for electronic goods. At this point in time however, we are not particularly bullish on the market as a whole.'
Taiwan cheap relative to its own history.
Short position in Taiwan at three year high.
The market already factored in concerns.
To promote 'long-term investment'
Switching 'hard and expensive'
Smaller funds still packing a punch
To drive progress