Technology Rival Taiwan Set to Trump South Korea
Technology Rival Taiwan Set to Trump South Korea
(Bloomberg) -- They’re both technology heavy, export dependent economies located in Asia, but when it comes to their stock market performance this year, that’s about where the similarities end for South Korea and Taiwan.
While Taiwan’s benchmark Taiex Index is the second-best performing stock market among emerging Asia economies this year with a 12% gain, South Korea’s Kospi Index is one of the worst with a 1% advance amid a sluggish economy and ramping trade tensions with Japan.
“Diverging economic and corporate earnings conditions, the highly cyclical nature of their equities markets at a time of lackluster growth, and more recently rising tensions between Korea and Japan, explain the divergence,” Societe Generale SA analysts said in a report Wednesday. “We expect the dislocation, most evident since the start of the year, to continue.”
The market consensus is for Korean corporate profits to fall almost 23% this year, a “massive downgrade” compared with a 2% drop for their Taiwanese counterparts, they said.
One key distinction is the breadth of industry contributions between the two markets, or lack thereof, according to SocGen. While dominant chipmakers Samsung Electronics Co. and SK Hynix Inc. have actually held up well -- climbing at least 21% this year -- negative returns from much of the rest of the market have largely canceled out those gains, the firm found.
SK Hynix rose as much as 3.6% after announcing plans for a “significant” cut to its 2020 spending and reduction in DRAM production capacity from the fourth quarter, while also posting earnings that missed estimates.
| Sector Contribution | MSCI Taiwan YTD Returns (%) | MSCI Korea YTD Returns (%) |
|---|---|---|
| Technology | 11 | 5.9 |
| Financials | 2.2 | -0.4 |
| Health care | 0 | -1.4 |
| Industrials | 0.3 | -1 |
| Materials | 0.6 | -0.5 |
| Other | 1.3 | -0.7 |
| Total | 15.4 | 1.9 |
| Source: Societe Generale, Bloomberg, MSCI | ||
By contrast, broad returns across other industries have helped bolster Taiwan’s advance this year, the data show.
As for Taiwan’s leading chipmaker Taiwan Semiconductor Manufacturing Co., the firm’s plan to mass produce 5-nanometer chips by the first half of 2020 will help “fuel a faster earnings recovery next year,” according to Charles Shum and Simon Chan, Bloomberg Intelligence analysts, in a July 22 outlook. The stock is up 17% this year.
Stock Market Summary
- MSCI Asia Pacific Index ex-Japan up 0.2%
- MSCI Asia Pacific Index up 0.1%
- Japan’s Topix index up 0.2%; Nikkei 225 up 0.3%
- Hong Kong’s Hang Seng Index up 0.3%; Hang Seng China Enterprises up 0.5%; Shanghai Composite up 0.3%; CSI 300 up 0.5%
- Taiwan’s Taiex index down 0.1%
- South Korea’s Kospi index down 0.6%; Kospi 200 down 0.3%
- Australia’s S&P/ASX 200 up 0.3%; New Zealand’s S&P/NZX 50 up 0.6%
- India’s S&P BSE Sensex Index up 0.8%; NSE Nifty 50 up 0.7%
- Singapore’s Straits Times Index up 0.3%; Malaysia’s KLCI little changed; Philippine Stock Exchange Index little changed; Jakarta Composite up 0.2%; Thailand’s SET up 0.3%; Vietnam’s VN Index up 0.7%
- S&P 500 e-mini futures little changed after index closed up 0.5% in last session
To contact the reporter on this story: Eric Lam in Hong Kong at elam87@bloomberg.net
To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Lianting Tu, Cormac Mullen
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