Taiwan 01 (May 08 - May 10)

[winston]

If one would like to buy some Taiwanese stocks, there is the Lyxor Taiwan & Hotung listed in the SGX.

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Risks - High NT$, Slowdown in export to US, Slowdown in export to China

May 7 (Bloomberg) -- Taiwan's exports increased less than economists forecast in April as U.S. demand faltered and sales to China slowed.

Overseas shipments, which make up about half of the economy, rose 14 percent from a year earlier, easing from March's 22.8 percent gain, the Ministry of Finance said in Taipei today. That's less than the median estimate of 19 percent in a Bloomberg News survey of 13 economists.

The report underscores the risk to growth in Asia's export- dependent economies as the U.S. financial crisis spreads, damping demand for electronics made in Taiwan and Singapore and vehicles from Japan and South Korea. The International Monetary Fund has lowered its forecast for the global expansion this year and said there's a 25 percent chance of a world recession.

``The electronics sector is feeling the pinch as U.S. consumers are curtailing their purchases,'' said Frederic Neumann, an economist at HSBC Global Research in Hong Kong. ``As the effects of the subprime chill spread around the globe, export growth is likely to come under further pressure.''

Imports rose 17.7 percent in April, cooling from March's 37.3 percent increase. Economists forecast a 28.1 percent gain.

Taiwan's trade surplus shrank to $1 billion from $1.47 billion a year earlier.

The report was released after the close of trading on the island's stock exchange. The Taiex index rose 0.8 percent.

Taiwan's shipments to the U.S. gained 2.2 percent in April, after rising 7.7 percent in March. A slowdown in the U.S. will inevitably have an impact on export growth, central bank Governor Perng Fai-nan said on March 24.

Slowing China Demand

Exports to China and Hong Kong combined advanced 15.7 percent in April, easing from a 23.3 percent increase in March.

``The slowing export growth to China is an unexpected and unpleasant sign,'' said Chiu Ting-neng, an economist at First Taisec Securities in Taipei. ``Exports will probably miss the government's projection this year, as China's economy will probably cool after the Olympics and the U.S. subprime crisis continues to hurt consumption there.''

Sales of electronics to China had previously helped the Taiwan weather fallout from the U.S. financial crisis. China and the U.S. are the island's two biggest overseas markets.

China, which regards Taiwan as one of its provinces, has growing trade and investment links with the island in spite of a ban on direct transport across the 100-mile Taiwan Strait that separates them.

Shipments to Japan climbed 11.7 percent in April, after rising 3.2 percent in March. Exports to Europe gained 9.3 percent, today's report showed.

Electronic Exports

Exports of electronics rose 3.1 percent in April, slowing from a 5.3 percent gain in March. Exports of information technology and communications products climbed 11.4 percent, after rising 16.4 percent in March.

A stronger Taiwan dollar may also be damping exports by making the island's goods more expensive overseas. The island's currency traded at NT$30.488 against the U.S. dollar, taking this year's gain to 4.8 percent.

Sales at Taiwan Semiconductor Manufacturing Co., the world's largest customized-chip maker, will be little changed in the second quarter from the previous three months, Chief Financial Officer Lora Ho said last week. In U.S. dollar terms, revenue will grow 4 percent to 6 percent, she said.

[blid2def]

Thread moved to SGX Stockpicks section after discussion with winston. The intent was to highlight how the developments in Taiwan may impact the stocks like Lyxor Taiwan & Hotung.

[winston]

UPDATE 1-TSMC posts stronger April sales, topping UMC

(Recasts with details) TAIPEI, May 9 (Reuters) - Top contract chip maker TSMC <2330.TW> said on Friday its April sales rose by a quarter from a year ago, topping smaller rival UMC <2303.TW>, as they enjoyed a recovery from the chip sector's downturn.

After a weak first quarter, both TSMC and UMC had expressed optimism over a pickup in demand, with the sector leader forecasting flat to slightly higher sales in the second quarter.

Unconsolidated sales at Taiwan Semiconductor Manufacturing Co Ltd (TSMC) reached T$28.09 billion ($912 million) last month, marking its first month-on-month rise in three months and was higher than T$22.513 billion a year ago.

That was also up 5.8 percent from March.

For the first four months of the year, TSMC's consolidated sales totalled T$116.34 billion, up 32 percent from the same period a year ago, the Taiwan company said in a statement.

To see a graphic of TSMC's sales, click on: http://int1.fp.sandpiper.net/reuters/ed ... TSMCSL.gif TSMC and UMC supply to fabless chip designers and some integrated devices makers, including Texas Instruments Inc .

TSMC announced the sales result as the Taipei stock market closed on Friday. TSMC shares fell 1.8 percent while UMC shares edged up 0.5 percent, against the main TAIEX's <.TWII> 0.8 percent fall.

UMC's April sales rose 4.8 percent from a year ago.

[iam802]

Interesting point to note.

Quanta, the world's largest laptop maker raise its forecast for 2008. So, it seems that the US slowdown is not having a huge impact.

They supply to Dell, HP, and Apple.


http://in.reuters.com/article/asiaCompa ... 0720080429
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Tue Apr 29, 2008 11:32am IST

TAOYUAN, Taiwan, April 29 (Reuters) - Taiwan's Quanta Computer (2382.TW: Quote, Profile, Research), the world's largest contract laptop maker, said on Tuesday quarterly earnings rose 18 percent on solid demand for its notebook PCs.

Quanta, which supplies to top PC vendors such as Dell (DELL.O: Quote, Profile, Research), Hewlett-Packard (HPQ.N: Quote, Profile, Research), and Apple (AAPL.O: Quote, Profile, Research), posted January-March net profit of T$4.0 billion ($131 million), up from T$3.402 billion a year ago.

The first-quarter result was in line with expectations for a T$4.085 billion profit, according to forecasts from five analysts surveyed by Reuters Estimates.

Quanta also posted a 2007 full-year net profit of T$18.455 billion, compared with T$12.92 billion for 2006.

The company also raised its 2008 notebook computer shipment forecast to 40 million units from a previous 36 million, and said its notebook shipments would rise about 10 percent in the second quarter from the first.

Quanta and smaller rival Compal Electronics (2324.TW: Quote, Profile, Research) make about 60 percent of the world's notebook computers.

Shares of Quanta lost 9 percent in the first quarter, while Compal's stock dropped 18 percent, against the main TAIEX's 0.8 percent gain in the same period.

Quanta trades at 13.3 times price to earnings, while Compal trades at 15.4 times, based on Reuters data. (US$1=T$30.3) (Reporting by Sheena Lee; Editing by Louise Heavens))

[winston]

April 4 (Bloomberg) -- Hong Kong brokerages have raised as much as NT$1.25 trillion ($41 billion) of funds to buy Taiwan stocks on expectations the island's new president will have more open economic and trade policies toward China, the Commercial Times said, citing Fubon Securities Co. Chairman Yeh Kung-liang.

The inflow of Hong Kong funds will reach a peak in the third quarter, focusing on shares with investment in China, direct transport links with the mainland, financial and asset-backed stocks, the Taipei-based, Chinese-language newspaper said.

Taiwan's Taiex Index beat the world's biggest stock markets in the first quarter on prospects the election of Ma Ying-jeou from the opposition Kuomintang March 22 will help ease travel and investment restrictions with the fastest-growing major economy.

The Taiex posted the only gain among benchmark indexes for the 20 largest markets, climbing 0.8 percent in the three months ended March 31, according to data compiled by Bloomberg.

[winston]

TAIWAN – DAWN OF A NEW ERA?
07/05/2008

Will recent political changes in Taiwan mean better ties with China and improved prospects for its stock market? Lion Capital fund manager, Mr. Tan Jenn Yee, shares his views.


The Taiwan stock market has outperformed its Asian peers in the last six months. What are the reasons behind this out-performance?

Taiwan has long been regarded as an underperformer, particularly among foreign institutional investors, as returns enjoyed by investors is on the low side. However, sentiment has improved of late and we find that investors have turned rather positive on the market.

One of the factors for the improved sentiment lies in the recent political changes in Taiwan. The Kuomintang, which is the largest political party in Taiwan, won the Legislative Election in January and the Presidential Election in March this year. The victory effectively ended an Executive-Legislative political deadlock and resulted in the same party having control of both the legislative and executive branches for the first time in 8 years.

This is a very significant milestone in the country’s political history. At the same time, the Kuomintang candidate – Mr. Ma Ying-Jeou - in his presidential campaign had proposed closer cross strait relations with China. His victory is regarded as a very positive factor as it heralds expectations of improved cross-strait economic ties with China.


What do you see Mr. Ma Ying-Jeou putting in place to improve relations with China?

As the new president, Mr. Ma is likely to bring significant improvement in co-operation between the cabinet and the legislature. With global growth expected to slow, the Kuomintang-controlled legislature is likely to approve a larger budget to boost domestic demand under its administration.

Taiwan’s economy would also receive a boost through closer cross-strait economic ties with China.

Areas that could see the most progress would likely be those that do not require legal revisions or bilateral negotiations and those that do not involve sensitive issues about sovereignty. Based on these, we are also likely to see the easing of restrictions on the entry of Chinese capital and tourists and China-bound investments, and the establishment of direct links in postal, transportation and trade between China and Taiwan.

Furthermore, the opening of the Taiwanese economy to China could attract a large influx of capital into Taiwan. The closer economic ties would likely help the Taiwanese domestic market outperform and reverse its prolonged de-rating that it has experienced.


Which companies/sectors are likely to benefit most from stronger economic ties between China and Taiwan?

We like companies that can provide positive surprises through capital restructuring, either by raising dividend payout ratios, or through share repurchases and capital reductions.

We are eyeing high quality, potential beneficiaries of the improved relations with China in the hospitality and banking industries, as we are likely to see an increase in Chinese tourist arrivals. We are also likely to see some progress made on cross-strait banking association, which would help accelerate industry consolidation, given the scale required to compete in the Chinese financial market.

We have also invested in sectors that offer secular growth opportunities, such as the notebook PC and digital camera sectors. This stems from our observation that well placed technology companies are likely to benefit from the new low price points that have resulted in accelerated desktop personal computer replacement. At the same time, the need to penetrate price sensitive emerging markets is forcing Japanese digital still camera brands to increase outsourcing efforts in order to remain competitive.


Is the Lion Capital Taiwan Fund positioned to invest in these promising sectors?

Financials, including real estate related stocks, constituted close to 21 per cent of the Lion Capital Taiwan Fund, as at 31st March 2008.

The fund is also overweight in consumer discretionary stocks, which are likely to benefit from improved cross-strait economic relations.


Are there any repercussions for Taiwan should China’s economy overheat?

We believe that the impact on Taiwan could be less relative to the other regional economies, since China is more of a manufacturing centre rather than an export destination for Taiwan.


How has news that Taiwan may allow mutual funds to increase exposure to Hong Kong-listed China shares affected your investment strategy?

The increase in allowable limits for investments in mainland shares, red chips and H shares is likely to be positive for Taiwanese financial holding companies. Our fund is already well-positioned in most of the leading sectors of the industry.


What are your concerns about Taiwan?

Taiwan has the largest exposure to global capital expenditure and global consumers and the lowest exposure to domestic demand across all Asian markets.

While firmer domestic demand can help cushion Taiwan against slower external demand, the earnings risk is tilted towards the downside for Taiwanese exporters if a recession in the U.S. turns out to be sharper and more prolonged than forecasted.


Do you find valuations attractive at the moment? How does Taiwan compare with the rest of Asia in terms of valuations?

On an absolute basis, Taiwan is trading below value, with an implied terminal growth rate of -1.1 per cent, on our proprietary dividend discount model.

On a relative basis, its 4.5 per cent dividend yield is high and its price to book value of 2.2 times is at 23 per cent discount to its own historical average. In terms of trailing price/earnings ratio however, it is trading on par with the region according to Citigroup Investment Research.


Do you expect Taiwan to continue outperforming other Asian bourses in the next 2 to 3 years?

Investors can expect to experience share price volatility in the short term. In terms of risk, earnings may be revised downwards because exporters would be facing challenging times and companies will start to expense all employee bonuses in first quarter of this year, even though the market is undervalued.

However, with the Kuomintang’s election victory, which ends the Executive-Legislative deadlock, the steady transition of power to a new government will likely lead to improved relations with China, which could trigger a re-rating of the Taiwanese bourse. If this pans out, it is likely to be positive for investors in the long run.

[winston]

Another "expert" recommending Taiwan besides Jim Rogers. Talking of Jimmy, he was very wrong about Alibaba and Zimbabwe. Alibaba has dropped >50% (?) since he recommended it while Zimbabwe is a basket case now..

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When to Buy My Favorite Asian Stock Market ( Taiwan )
By Ian Davis, editor, Quant Trader
May 10, 2008

In April 2007, the stock market of the tiny island nation of Taiwan had just about everything going for it...

It was cheap. The world's cheapest stock market at the time.

It was hated. Investors were worried the country would be invaded by China.

It was in an uptrend. Taiwan's stock market had just broken out to a new multiyear high.

When an asset is extraordinarily cheap and hated (or ignored), there's little risk you'll lose money. And by waiting for an uptrend before buying, you avoid tying your money up in a dead market for years.

In my Quant Trader service, we bought shares in the Taiwan Fund (TWN) to capitalize on the Taiwan opportunity. The trade worked out wonderfully for a few months... but we stopped out of the position this February as markets around the world plunged. It's a shame... because this trade has huge potential.

So what do we need to see before jumping back into Taiwan?

The governments of Taiwan and China have been arguing over the jurisdiction of Taiwan for over 50 years. China has vowed to bring Taiwan back under its rule by force if necessary. This political risk is the reason why Taiwan was, and still is, so cheap.

However, nowadays relations are improving...

The recent election of Ma Ying-jeou brings hope that the two governments will forge new diplomatic and economic ties over the next few years. This is a huge plus for Taiwan. It's one of the most advanced countries in Asia and home to giant semiconductor and electronics manufacturing industries... so a friendly China will make for a good trading partner.

Another sign I like to see when investing in an Asian market: Legendary investor Jim Rogers has named Taiwan as one of his top spots for new money right now. He believes China and Taiwan will merge their economies and currencies together. This would likely create a huge stock market boom in Taiwan. And boy do these stocks have room to run...

Taiwan: A Cheap Play On Asian Growth

As you can see, Taiwan is still extremely cheap and the long-term uptrend that began in 2003 is still in place. However, the short-term trend is down. The Taiwan Fund is down about 11% over the last month.

The U.S. and China are Taiwan's two largest trading partners. So, Taiwanese stocks tend to fall alongside China and the U.S.

Again... that's the short-term picture. Taiwan is a great place to hunt for long-term investments in the Asian economic boom.

The trouble with big stories like Asia is there's usually too much hype surrounding them to get a great deal on assets. That's not the case with Taiwan. It's still cheap, and most folks are ignoring the opportunities. All we need is the uptrend before we stand to make huge returns here.

[winston]

Major repair job tops Ma's action list
Peter Enav
Tuesday, May 20, 2008

Taiwan swears in a new president today who promises a clean break with his predecessor's confrontational stance toward the mainland.

The soft-spoken Ma Ying-jeou contrasts sharply with the combative outgoing president, Chen Shui-bian. Ma has pledged to reinvigorate Taiwan's sluggish economy and stabilize relations with Beijing.

Chen pushed policies that, if taken to their logical conclusion, would have led to an independent Taiwan.

The policies angered Beijing along with Washington, which saw risky brinkmanship.

Ma favors cooperation. He wants to hitch Taiwan's economic wagon to the mainland boom and sign a still- undefined peace treaty with Beijing.

"Taiwan in the future will be a responsible stakeholder, meaning a peacemaker instead of a troublemaker," he said last week.

Even before taking office, his vice president met with President Hu Jintao on Hainan island and won agreement to allow a major expansion of mainland tourist traffic to Taiwan. They also discussed direct flights.

But the prospects for a peace treaty are uncertain at best. Beijing wants Taiwan under its rule, perhaps with a deal like with Hong Kong.

One legacy of Chen's independence push, however, is a populace that views itself as separate from the mainland even more so than before.

Polls show that two-thirds of Taiwan people now identify themselves first as Taiwanese rather than Chinese - twice as many as when Chen arrived in power in 2000.

Chen de-emphasized Chinese history and culture in education, eliminated the name "China" from a slew of government companies, and sought UN membership for the island under the name Taiwan rather than its official title of the Republic of China.

"It's a good thing Chen reminded people of Taiwan's separateness," said 26-year-old Chen Wan-yun of Taipei. "But it is not good that he adopted a radical approach."

Perhaps recognizing the shift in public mood, Ma promised in his election campaign that he would not discuss reunification in any talks with Beijing.

He appeared to raise the bar further last week. "It is very difficult for us to see any unification talks, even in our lifetimes," the 57-year-old Ma said.

He has named Lai Hsin-yuan, a strong supporter of Taiwan sovereignty, to the key position of China affairs coordinator. That incurred the wrath of hardliners in his own Nationalist Party, which traditionally favors reunification.

Also at home, economy could be challenging. Annual growth slowed to less than 4.5 percent during Chen's eight years in office from 6 percent for most of the 1990s.

Ma wants to expand the high-tech trade, in which Taiwan-made electronic components go to the mainland for assembly into everything from laptops to modems in low-cost factories.

ASSOCIATED PRESS

[kennynah]

20 May 2008 00:26 GMT

Abu Dhabi Securities Market may list ETF on Taiwan equities - report
TAIPEI (XFN-ASIA) - The Abu Dhabi Securities Market (ADSM) may list an exchange-traded fund based on Taiwan equities at the end of the year or early next year, the Commercial Times reported, citing an ADSM announcement.

ADSM is expected to adopt an ETF to be issued by Taiwan's Polaris Securities Investment Trust Co Ltd that will include market heavyweights and high-yielding stocks as its underlying components, it said.

The report said the stock exchanges of Singapore, Hong Kong, Thailand, and Warsaw are expected to follow ADSM's lead in listing ETFs on Taiwan equities.

Theprospective overseas investments in Taiwan are expected to top 50-70 bln twd, it cited an industry source as saying.

[kennynah]

20 May 2008 01:25 GMT
Ma Ying-jeou takes oath as Taiwan's president
TAIPEI (XFN-ASIA) - Ma Ying-jeou took the oath of office this morning as Taiwan's new president, two months after sweeping to victory on a pledge to mend relations with China.