TAIEX Joins Asia¡¦s Midday Reversal
TAIEX +1.98% to 4171.1 on NT$51.85bn (US$1.55bn)
Tech +4.02% on 59% of trading; Financials +0.85% on 10% of trading
Gretai +3.25% to 56.63 on NT$5.90bn (US$0.18bn)
FINI net sold NT$2.89bn
Domestic ITC net sold NT$0.77bn
Domestic proprietary traders net bought NT$0.43bn
Taiwan Market Afternoon Commentary, November 21, 2008
Asian markets opened lower as U.S. stock and bond markets dropped to their lowest levels since the economic crisis began, as concerns about rising defaults, solvency in the banking system, and deteriorating economies continued to strangle investor confidence. The US DOW is now down 43.5% from its all-time high reached roughly a year ago while Taiwan has lost 57% in six-months. Despite government bailouts, stimulus packages and rate cuts, the economy continues to spiral downward, and it¡¦s not clear how much more action will be needed to bring stability to the global economy. Despite the headwinds, Asian indices managed to reverse early-session losses, led by a 4.6% jump in the Hang Seng to 12,872 around mid-day. Taiwan (+2%) and Korea (+5.8%) both closed with healthy gains despite wallowing in negative territory earlier today. TAIEX slid below 4000 midday to a six-year low.
Petrochem (-4.0%) was today¡¦s outlier as Tech (+4.0%, 59% of turnover) spearheaded an advance by all other sectors to lift TAIEX back to 4171.1 points on NT$51.85bn in trading volume. Financials (+0.9%) accounted for 10% of turnover. Tech blue chips TSMC (2330 TT, NT$38.5), Hon Hai (2317 TT, NT$57.7), and Mediatek (2454 TT, NT$201) advanced while Formosa Chem and Fiber (1326 TT, NT$46.1), Formosa Plastic (1301 TT, NT$47.9), and NanYa Plastics (1303 TT, NT$38.5) declined. Chinatrust (2891 TT, NT$9.4) and AUO (2409 TT, NT$19.75) were the most active with 73 and 67mn shares, respectively, changing hands. The advance and decline ratio was roughly three to one.
Elpida¡¦s Taiwan visit sparks merger rumors
A visit to Taiwan by Japan¡¦s Elpida sparked merger rumors involving Taiwan¡¦s Powerchip (5346 TT, NT$2.58) and Promos (5387 TT, NT$1.26), although both companies denied engaging in any merger talks. Powerchip¡¦s chairman opined that DRAM supply would drop by 25%-30% January. Nevertheless, investors were cheered by Elpida¡¦s expansion efforts that include increasing its Rexchip stake to 53% through Powerchip despite the current gloomy DRAM environment, Elpida¡¦s plan to increase Taiwan production, and the government¡¦s support for the DRAM sector¡XPowerchip, ProMOS, Nanya Tech (2408 TT, NT$3.96), and Inotera (3474 TT, NT$6.02) gained. Key points from a joint news conference held by Elpida and PSC after the market close: 1) Global DRAM production to fall 25% in JAN 2009 with 1Gb DDR2 price to rise back to US$1.6-1.8. 2) Closer ties between the two firms. 3) PSC cash position not as critical as people think. 4) Elpida does not rule out potential merger with ProMOS.
Bargain Hunting in Solar
After recent sharp decline in solar makers, bargain-hunting was seen in Motech (6244 TT, NT$56.8), Wafer Works (6182 TT, NT$38.4), Green Energy (3519 TT, NT$71.5), E-tone (6182 TT, NT$38.4) and Gintech (3514 TT, NT$65). Oil prices dropped more than 7 percent to below US$50 a barrel as a bearish US jobs report intensified concerns of a deep global recession, further crushing fuel demand expectations. Solar and alternative energy related shares have been on a fall since summer peaks. Shares of Motech for instance erased 81% since July.
Lower oil continues to hurt petrochem
Petrochem was the weakest performer today as Formosa Group shares dipped lower on concerns about gross margins. OCT revenue for Formosa Plastics declined 15~20% MoM while Formosa Petrochemical (6505 TT, NT$69) sales also declined now that oil has slipped below US$50/bbl. SinoPac¡¦s petrochem analyst, Andrew Hsu, remains conservative on the sector due to weak demand and new capacity from the Middle East. He believes that Formosa Petrochemical¡¦s gross margin remains capped.
NB gained, led by Wistron
Shares of Wistron (3231 TT, NT$20) advance another 7% after announcing pleasing OCT net earnings of NT$952mn. Analysts celebrated the company¡¦s achieving its annual forecast by lifting their target prices on the stock. HSBC forecasts Wistron to ship 23mn to 24mn NBs next year, which includes Netbook (9.5%-14% weighting). Overall growth will reach 15-20% in 2009. Our covering analyst, Bamboo Lin, forecasts shipment of 25-28mn units in 2009 and like the stock¡¦s attractive valuation. With Dell¡¦s earnings beating expectations and stronger-than-expected preliminary results for HP, Taiwan NB maker followed suit as Acer (2353 TT, NT$41.0) added 10.8%, Asustek (2357 TT, NT$34.45) gained 7%, Quanta (2382 TT, NT$35.40) gained 7.2%, and Compal Electronics (2324 TT, NT$16.20) jumped 10.6% from session lows. Elsewhere, semi (+4.5%), IC design (+6.3%) and networking (+5.4%) also moved higher on the day.
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