【Text / Lin Xinyi】
U.S. 10-year bond yields rose above 3% on May 6, hitting a new high since the end of 2018. Under the doubts that the rising yields have caused capital withdrawal and impacted the stock market, how should investors view the layout of Taiwan stocks at this moment? Strategy? At the critical moment, this issue specially invited Zhang Xi, chairman of Cathay Pacific Investment Trust, Huang Junbin, manager of Qunyi Innovation and Technology Fund, Guo Gongke, chief financial officer of Cheetah, and Ding Yanjun, an analyst at Enlightenment Investment Consultants, to share their thoughts on how to deal with Taiwan stocks at this stage.
Belief point of view
Zhang Xi, Chairman of Cathay Pacific Investment Trust, Huang Junbin, Manager of Qunyi Innovation Technology Fund
3.3% U.S. 10-year Treasury yield is a warning line
“The worst situation for Taiwan stocks has passed, and after the bottoming out, there will be opportunities to gradually recover.” Zhang Xi, chairman of Cathay Pacific Investment Trust, said so, maintaining his usual relatively optimistic attitude.
He analyzed that the main reason for the decline in this wave was the issue of interest rate hikes caused by inflation, especially the market’s expectations of interest rate hike hawks, which caused too much panic. From the perspective of market indicators, the killing force caused by panic may have a chance to change.
Zhang Xi’s so-called market indicator is the “American Retail Investor Sentiment Index” (AAII for short), and the bearish ratio of this indicator has reached a high of 59.36% since April 28. After hitting a new high in recent years, it is still at 50. The % above remains high, which means that the pessimism of retail investors may have reached the “peak”, and there will be a possibility of reversal and downward.
In the part of Taiwan stocks, the current large-cap financing balance has returned to the relatively low water level of 16,162 points, the pre-wave low on October 5, 2021, and the impact of short-term chip floating is gradually reduced.
Zhang Xi believes that as inflation is expected to be brought under control in May and June, the stock market will return to an upward trajectory by then. Instead, it is an excellent opportunity to pay attention to the layout of oversold “good stocks”.
Zhang Xi analyzed that the Federal Reserve will raise interest rates by two yards in May. Although Chairman Powell indicated that the pace of interest rate increases of two yards will be maintained in the next few meetings, he has not actively considered raising interest rates by three yards, and has played down the possibility of aggressive interest rate hikes. For the market, it should be beneficial to vacate the taste. As the impact of the future Russian-Ukrainian war fades, China’s city closure problem is lifted, and high oil prices are under control, under an optimistic state, March and April may be the highest point of inflation.
Just before that, as long as inflation concerns remain unresolved, any troubles will trigger the association of accelerating interest rate hikes, and the trend is prone to shocks of ups and downs, and large-scale washing of the sauna. And be patient.
According to his assumptions, the Fed should raise two yards in June and one yard in July, and it is estimated that the interest rate level will rise to 2.5% by the end of this year. Zhang Xi estimates that the US 10-year government bond yield is between 2.9 and 3.1. % is a reasonable range that the market can still accept. “Once it rises above 3.3%, it will be higher than expected, so pay special attention.”
As for the oil price that affects inflation, “if it remains near $110, it is still within a reasonable range; once it exceeds $120, the market’s doubts about inflation will likely deepen.” However, Zhang Xi believes that although the Russian-Ukrainian war has caused oil supply It is tight, but since India and China still buy oil from Russia, the overall global supply and demand will not be too imbalanced.
In addition, although China’s extension of the lockdown has caused some Taiwanese factories to suspend production, “orders are only delayed, not cancelled.” Taiwan’s export orders in March and the amount of export orders in the first quarter both hit new highs for the same period, showing a strong performance in the off-season. The strong export momentum still supports Taiwan’s economic growth. In addition, the estimated price-earnings ratio of Taiwan stocks has reached 11 times, which is higher than that of March 2020. At the time of the outbreak of the epidemic, 12.1 times was still low, and the average dividend yield was still 5%, indicating that Taiwan stocks have long-term investment value.
Huang Junbin, manager of Qunyi Innovation Technology, basically agrees with the above views, but he reminds him that although Taiwan’s overall economic growth and performance prospects are good, he is still optimistic about the supply chain of growth stocks such as automotive electronics, semiconductors, and high-speed computing, but after all, the global market There are still many variables, including the EU’s official proposal to completely embargo Russian oil, many countries to strengthen military aid to Ukraine, etc., and China’s supply chain doubts have not been eliminated, the risk of accelerated tightening by the Federal Reserve still exists in the future. Therefore, at this stage, the market recovery The timing of confidence should not be overly optimistic.
In terms of layout strategy, he emphasized that it is advisable to maintain the basic principles of being cautious and not chasing highs and finding the bottom. Even if you open positions downward, you should adopt a batch layout, and choose stable growth stocks and high dividend stocks as much as possible. At the same time, a certain number of cash positions should also be reserved. When the stock market officially shows a bullish attack signal, the layout will be increased in batches, which can reduce the psychological pressure of investment.
Winner’s View
Guo Gongke, Chief Financial Officer of Cheetah
Stocks and bonds should be conservatively reserved with a high proportion of cash positions
In contrast, Cheetah CFO Guo Gongke has a more conservative view. “Under the international hyperinflation environment, coupled with the depreciation of the Taiwan dollar, it is difficult for Taiwan’s prices and the stock market to not be affected.” Guo Gongke believes that Taiwan stocks It is highly correlated with U.S. technology stocks, the U.S. stock market is short, and the Taiwan stock index is under downward revision pressure, which is a problem that investors cannot ignore.
He analyzed that as the crisis of U.S. stocks moving towards a bearish pattern continues to intensify, the bearish pattern of the Nasdaq and Philadelphia Semiconductor Index is becoming more and more obvious, while TSMC is also an important weight stock in both the Philadelphia Semiconductor Index and the Taiwan Stock Index. The semi-index trend shows a downward trend, and the shock correction of the Taiwan stock index should not be underestimated.
Guo Gongke said that the current international oil price and the CRB commodity index are at high levels, and the global supply chain is affected by the Russian-Ukrainian war and China’s closure of the city, and the high price situation is not easy to be quickly eased by raising interest rates. Until the international hyperinflation environment has not changed, it will be maintained at the high end on a normal basis.” He believes that the 3% level of the U.S. 10-year bond yield “is not the highest level and may continue to rise in the long run.”
Looking forward to the future, Guo Gongke believes that before the CRB index trend is determined to reverse and decline, assets such as stocks and bonds should be conservative, unless it is able to maintain high growth even when the global economy enters a contraction period, or industries that reverse the economic cycle, such as Tobacco and alcohol, military industry, oligopolistic industries, etc., otherwise should be treated with a conservative attitude.
He reminded that if he believes that he lacks absolute certainty in stock selection, then raising or retaining a high proportion of cash positions while the stock price rebounds will be a last resort option to avoid asset impairment.
Investment advice
Ding Yanjun, an analyst at Inspiration Investment Consulting
Returns return to 7% normal, anti-inflation stocks are safer
Ding Yanjun, an analyst at Enlightenment Investment Consultants, believes that due to the linkage between Taiwan stocks and US stocks, the observation indicators can look at the economic growth rate and inflation rate of the United States. At present, the average annual compound economic growth rate of the United States is about 4%, and the inflation rate is as high as 8%. %. After raising interest rates, the inflation rate will decline, but raising interest rates will also hinder economic growth. If the inflation rate falls below the economic growth rate later, the stock market will have a chance to rise in the long run.
In addition, Ding Yanjun reminded that under the low interest rate environment in the past few years, the stock market has soared, and after more than ten years of bulls, investors will mistakenly believe that this is the norm. In fact, the average annual growth rate of Taiwan stocks is 7%. Investors may have to get used to such a rate of return, and the financing cost is 6%. Therefore, it is recommended that investors should minimize financing operations.
In the short term, the price-to-earnings ratio of growth stocks will be revised downward, and it is not recommended to hold too much, unless the United States exploits shale oil, and prices drop significantly, inflationary pressures are resolved, and interest rates are likely to remain low; however, environmental awareness Rising up, the high cost of renewable energy is bound to push up prices. Therefore, it is recommended to invest in value stocks with low price-to-earnings ratios and high yields, or to allocate asset stocks that can fight inflation and financial stocks that benefit from interest rate hikes. It is relatively safe.
For more, see the latest issue ofthis week“(Issue 1325)
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