As the number of daily new infections of COVID-19 continued to dip last week, investor sentiment has started to improve, with net selling of local equities by foreign investors narrowing to NT$2.26 billion (US$75.21 million) so far this month, compared with NT$42.63 billion at the end of last month.
Foreign investors last week bought a net NT$4.67 billion of shares on the main bourse after selling a net NT$42.23 billion in the previous two weeks, Taiwan Stock Exchange statistics showed.
The TAIEX was up 1.7 percent for the entire week, ending at 11,815.70 on Friday.
“There are some issues that deserve further observation in the next two weeks, such as whether the outbreak is under control after a large number of Chinese workers return to work and if there are any downward revisions about factories’ capacity production and market demand,” Allianz Global Investors Taiwan Ltd (安聯投信) said in a note on Saturday.
On a positive note, local equities would gain support from abundant funds and sound fundamentals, such as 5G growth in the long run, unless the coronavirus outbreak is seriously out of control and the decline in consumption power drags the economy down, it said.
Uni-President Assets Management Corp (統一投信) said in a note on Friday that a fresh wave of panic selling of local equities is unlikely in the short term.
“The worst is over. As long as the outbreak no longer spreads and the supply chain returns to normal, it is estimated that there may be a demand by companies for replenishing inventories in late February, and even the business in the second quarter is expected to be off-season,” Uni-President Assets said.
However, investors must pay attention to the risk of shortages in raw materials and components within supply chains after the resumption of work in China, Allianz said.
“Even more worthy of attention is industries with low inventory levels or those with factories in Wuhan, such as passive components and printed circuit boards industries,” it said.
Wuhan is the city in China where COVID-19 originated.
Allianz said that several manufacturers have started to shift their production bases from China due to the US-China trade dispute, and the COVID-19 outbreak presents an opportunity to “accelerate the shift of production out of China and benefit companies whose products are not made in China.”
Separately, 103 firms and 129 individuals have applied to repatriate NT$56.4 billion since a repatriation bill took effect on Aug. 15 last year, data released by the Ministry of Finance showed.
As of Friday, about NT$53.5 billion had been approved, while NT$47.2 billion had been repatriated, the ministry said.
The bill provides for a preferential tax rate of 4 percent in the first year and 5 percent in the second year if the pledged investment materializes within a certain time.
