|Day's range||12,055.91 - 12,117.55|
|52-week range||9,828.03 - 12,197.64|
(Bloomberg) -- The landslide election victory for President Tsai Ing-wen has reinforced a winning run for Taiwan’s financial markets.Traders on Monday had their first chance to react to the victory of Tsai’s Democratic Progressive Party -- which advocates for Taiwan’s formal independence. The Taiex stock benchmark closed at its highest level in more than three weeks with a 0.7% gain, while the local dollar gained 0.2% to close stronger than 30 per U.S. dollar for the first time since June 2018. The yield on 10-year government bonds was little changed at 0.6456%.Foreign investors bought a net NT$10.7 billion ($359 million) of local stocks on Monday, the most in almost a month, according to exchange data.Saturday’s result is helping extend what has been a positive period of investor sentiment toward Taiwan. Stocks have recently touched the highest levels in nearly three decades. Taiwan’s dollar strengthened for an eighth week last week in its longest winning streak since 2013 and government-bond yields remain near all-time lows.“Investors will pay attention to beneficiary stocks in the short-term,” said Shelly Lee, chairman of Mega International Investment Services Co. “With the upcoming trade deal signing and expectations of Federal Reserve easing, the bullish trend will continue for Taiwan’s markets.”Stocks in the biotech and medical care sector were among the best performers on Monday, with a measure of those shares rising as much as 1% before closing up 0.2%, on bets they will continue to benefit from supportive government policies. A gauge of tourism stocks was the worst performer, ending 2.6% lower, amid concern the election result will further chill cross-strait ties.Taiwan Raises GDP Outlook as Investment Trumps Trade WarIf recent history is any guide, Taiwan’s equities are poised to extend gains in the coming month. The benchmark Taiex index has climbed by an average of 7.4% in the 30 days after the results of the past six presidential elections, as investor concern about political risk fades. This week’s planned signing of an initial trade accord between China and the U.S. is also expected to give a boost.“Taiwan stocks tend to rise after an election, as uncertainty is removed,” said Li Fang-kuo, chairman of President Capital Management. He sees the Taiex index hitting a record high by April, helped by continued inflows and a strong outlook for Taiwan’s technology sector.Analysts have turned the most bullish on Taiwan stocks since 2015, according to data compiled by Bloomberg. Efforts by the government to lure further capital and incentivize local firms to invest at home have helped Taiwan stay resilient in the face of the U.S.-China trade war. This has helped encourage strong foreign inflows into its technology sector, which in turn have helped boost the Taiwan dollar. Taiwan Semiconductor Manufacturing Co., Taiwan’s largest stock, reports earnings later this week.Money Pours Into Taiwan’s Markets as Election Nears The local currency is seen rising to 29.5 per U.S. dollar by year-end, driven by the appeal of companies related to 5G and further repatriation of investment, according to Cliff Tan, head of global markets research for East Asia at MUFG Bank Ltd. Government bonds are expected to be boosted by limited supply under Tsai’s leadership, said Kevin Shih, a trader with Jih Sun Securities Co.Profit-taking pressure may emerge nearer the Lunar New Year holiday, say analysts, while the outcome of the expected trade deal signing and recently heightened Middle East tensions will also be factors.“But any pull-back would be a good entry point,” said President Capital Management’s Li.(Update prices in the second paragraph, adds foreign inflows)\--With assistance from Miaojung Lin, Argin Chang and Ee Cheng Teh.To contact the reporter on this story: Cindy Wang in Taipei at firstname.lastname@example.orgTo contact the editors responsible for this story: Sofia Horta e Costa at email@example.com, David Watkins, Adrian KennedyFor more articles like this, please visit us at bloomberg.com©2020 Bloomberg L.P.
(Bloomberg) -- Investor sentiment toward Taiwan has rarely been this good, with only days to go before its first presidential election in four years.Its financial markets keep hitting new milestones: the Taiwan dollar last week strengthened past 30 per greenback for the first time since June 2018, government-bond yields remain near all-time lows and stocks are inching toward a record after their best year in a decade.While many anticipated Taiwan might get caught in the middle of the U.S.-China trade war, its economy and markets were aided in 2019 by local firms being incentivized to invest at home and there being about $12 billion of net inflows to foreign investors’ portfolios through November, according to government data. Fresh proposals to attract investment were announced last week.“Inflow from both foreign and domestic investors are going to help boost the stock, FX and bond markets in Taiwan,” said Angela Hsieh, a Singapore-based economist at Barclays Plc. Reasons she cited include investors continuing to take advantage of new tax breaks; as much as 30% of the money repatriated can go into Taiwan’s financial markets.Meanwhile, with signs of global semiconductors bottoming and equipment related to 5G wireless technology starting to be deployed, “I am positive on Taiwan’s equity market regardless of the upcoming election results” following Jan. 11’s vote, said Vincent Tsui, senior Asia analyst at Gavekal Research.The Taiex stock benchmark fell 1.3% Monday, its biggest drop in eight weeks, amid a broad decline in Asian equities.Overall, though, equities investors have shrugged off Taiwan’s rich valuations, with the price-to-earnings ratio for Taiex components the highest since 2012 on a year-end basis. Money is instead attracted by factors including a 3.8% dividend yield that’s among the world’s highest. Foreigners put a net $9.4 billion into Taiwan stocks last year, the most since 2016, according to data compiled by Bloomberg.Also on the horizon is a strong earnings rebound. Analysts predict a 20% jump for this year, which would be the most since 2014 and more than reverse 2019’s projected 13% profit drop caused by early-year weakness at semiconductor, plastic and panel makers. 5G adoption and Chinese companies diversifying to non-U.S. suppliers should help boost Taiwan firms’ earnings at least through 2021, KGI Securities said in a research note last month.Then there’s the economy. The government forecasts growth will top 2.5% again this year, stronger than regional peers. Foreign inflows boost Taiwan’s currency from demand to convert overseas cash into local dollars. The Taiwan unit has strengthened versus the U.S. dollar for seven straight weeks, the longest streak since May 2015.Cash remains plentiful, meanwhile, domestically Taiwan’s markets -- particularly from life insurers.As early redemptions of debt listed in Taiwan but denominated in mainly greenbacks pick up, Taiwan life insurers may be handed back as much as $44 billion in the first three quarters of the year, estimates Fubon Financial Holding Co. There’s little room for that cash to go overseas as insurers’ international investments are approaching the limit of 65.25% of working capital. The cap exists to reduce foreign-currency risks from overseas holdings.Bonds are a hallmark of insurers’ investment portfolios globally, and in Taiwan “all the bonds available on the market are mostly snapped up by banks and life insurers,” said Rachel Chang, a bond trader at Capital Securities. She sees that trend continuing for at least the first several months of 2020.That will keep prices up for bonds. A Bloomberg survey shows expectations that Taiwan’s 10-year government-bond yield may reach a record low of 0.6% by April due to abundant funds available for investment and limited supply of new notes.(Corrects redemption amount, time frame in third-to-last paragraph from story published Monday)To contact the reporters on this story: Cindy Wang in Taipei at firstname.lastname@example.org;Miaojung Lin in Taipei at email@example.comTo contact the editors responsible for this story: Sofia Horta e Costa at firstname.lastname@example.org, Kevin Kingsbury, Samson EllisFor more articles like this, please visit us at bloomberg.com©2020 Bloomberg L.P.