AllianzGI Taiwan Says Chipmakers Earnings Will Surge 30% in 2024

Cindy Wang, Bloomberg News

(Bloomberg) -- Taiwan stocks are likely to shrug off geopolitical concerns to mount a recovery next year, led by a resurgence in chip-sector earnings, according to the island’s largest active equity fund manager.

Taiwan’s semiconductors companies will see earnings growth of around 30% in 2024, said Ivy Chen, general manager and head of Taiwan at Allianz Global Investors, in an interview in Taipei on Tuesday. That’s compared with a 20% growth expected for Taiwan-listed companies as a whole, she said.

Escalating tensions between Taiwan, China and the US and fears of a global economic slowdown have driven foreign investors to pull $7.4 billion from Taiwan stocks this year, the most in Asia, according to Bloomberg-compiled data. Still, Taiwan’s benchmark Taiex, home to the world’s leading chipmakers including Taiwan Semiconductor Manufacturing Co., has gained 16% year to date, the second best-performing major stock market in Asia after Japan.

Geopolitical risk is “not news for Taiwanese people,” Chen said, adding that similar risks could emerge anywhere in the world in the wake of the Russian-Ukraine war and Israel-Hamas conflict. “The best way to reduce geopolitical risks is by diversifying in terms of asset class or sector.”

The main drivers of growth for Taiwan’s chip companies include improving end-consumer demand and the destocking of the sector coming to an end, Chen said, adding that demand for semiconductors related to artificial intelligence will continue to boom. She expects Taiwan stocks in 2024 to top this year’s gains.

Chen said she is confident Taiwanese stocks will attract foreign investors again with their earnings growth. Taiwan’s manufacturers have also increasingly diversified their production base, which will help boost their competitiveness as it alleviates geopolitical concerns, she said.

Over the longer term, the firm is positive on sectors including bicycles, textile, shoe manufacturing, machine tools, and biotech.

AllianzGI Taiwan manages NT$69.5 billion ($2.1 billion) in onshore Taiwanese stock funds as of September, the most in Taiwan, according to data from Taiwan’s Securities Investment Trust & Consulting Association. That includes a technology fund which beat 96% of peers in the past year, according to Bloomberg-compiled data, with Alchip Technologies Ltd., Quanta Computer Inc. and MediaTek Inc. among its top holdings.

--With assistance from Debby Wu.

(Updates with sectors preference in penultimate paragraph)