Taiwan: Attractive Valuation But Poor Momentum


Four Pillars of GDP: Driven by private consumption

Overall, Taiwan is experiencing slow GDP growth, which is basically only driven by private consumption. Investments, however, have had a big contracting impact on GDP growth.

Attractive valuation but poor momentum

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The Taiwanese market is trading at a relatively low PE versus other Asian markets. However, earnings growth has been poor and expected to remain below the Asian average. On the positive side Taiwan has the highest dividend yield in Asia.

A. Stotz Four Elements: Moderately attractive

Overall, Taiwan is moderately attractive in Asia considering all our four elements: Fundamentals, Valuation, Momentum, and Risk.

Fundamentals: Moderately attractive fundamentals due to relatively high return-on-equity versus other Asian markets over the past 12 months.

Valuation: Attractive, due to the highest dividend yield in Asia and relatively low PE.

Momentum: Below average earnings growth and poor price momentum.

Risk: Relatively high beta to Asia ex Japan.

The largest sector was the second best performer

Top 3 largest sectors: Information Technology is 49% of the total market capitalization, Financials 13%, and Materials 10%.

Best sector & stock: Consumer Staples +9.8%, Charoen Pokphand Enterprise Taiwan Co Ltd +30.4%.

Worst sector & stock: Health Care -9.1%, OBI Pharma Inc -25.8%.

Article by Dr. Andrew Stotz, Become A Better Investor

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Dr. Andrew Stotz, CFA is the CEO of A. Stotz Investment Research, a company providing institutional investors with ready-to- invest portfolios in Asia that aim to beat the benchmark through superior stock selection. The company also provides buy- and sell-side clients with financial models to value any company in the world and World Class Benchmarking to determine what companies are financially world class. Previously, as Head of Research at CLSA, Andrew was voted No. 1 Analyst in Thailand in the Asiamoney Brokers Polls for 2008 and 2009. He was also voted No. 1 Analyst in Thailand in the 2009 Institutional Investor magazine All-Asia Research Team Report. Andrew earned his PhD in finance at the University of Science and Technology of China in Anhui province, with a focus on answering questions raised by fund managers and analysts during his career about picking stocks and managing portfolios. In addition, Andrew has been a lecturer in finance for 22 years at various universities in Thailand. Since 2013, he has been the president of the CFA Society of Thailand. He is also the author of How to Start Building Your Wealth Investing in the Stock Market.