UBS Lowers Taiwan Equities Forecast on European Debt Concerns

Taiwan's president Ma Ying-jeou
Taiwan's president Ma Ying-jeou arrives for an interview at the presidential office in Taipei. Photographer: Maurice Tsai/Bloomberg

UBS AG, Switzerland’s biggest bank, cut its target for Taiwan’s stock index for a second time in three months amid concern the European debt crisis will slow demand for the island’s technology exports.

The benchmark Taiex index may advance to 7,600 by the end of the year, UBS said in a report, lowering the estimate by 5 percent from 8,000. The target was cut from 8,800 in March. The Taiex slid 1.2 percent to 7,288.79 at 9:59 a.m.

“The state of end-demand from Europe, given the sovereign debt issue and the decline in the euro is another source of concern, especially for” technology companies, William Dong, head of UBS’s Taiwan research team that was ranked second on the island by Institutional Investor, said in a phone interview in Taipei today.

The Taiex has slid 11 percent this year on concern some European countries will be unable to repay their debt even after the region’s leaders unveiled a bailout plan worth almost $1 trillion. The gauge jumped 78 percent last year as Taiwan’s President Ma Ying-jeou helped cement closer ties with China by abandoning his predecessor’s pro-independence stance after he took office two years ago.

Ma is pushing for a trade agreement with the mainland this year, and has opened up the island for new investments. Optimism that the pact will spur earnings will fail to offset the pressure from Europe, said Dong, who has been the head of Taiwan research at UBS for the past two years.

Taiwan’s shares may rally in the fourth quarter as President Ma’s ruling Kuomintang party offers “goodies” and other incentives to help win local elections at the end of this year, Citigroup Inc.’s Research Head Peter Kurz , whose team was ranked first for Taiwan research by Institutional Investor for the past three years, said in an interview last week.

“The global changes are more dominant factors than what’s happening locally right now,” said UBS’s Dong, 41. “Even the signing of the economic cooperation framework agreement or the elections are more secondary factors at this point in time. It’s the global factors that are more important.”

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