Economic growth forecasted at 5% by UBS, according to their latest report.
In the dynamic world of technology, Taiwan continues to be a beacon of growth and innovation. According to recent forecasts, MSCI Taiwan's growth is expected to reach approximately 16 percent, with earnings growth concentrated in large-cap companies.
The US Federal Reserve's anticipated rate cuts this month, next month, and in December may prompt Taiwan's central bank to ease monetary policy next year. This potential monetary support, as suggested by analyst Sunny Lin, is driven by weak domestic consumption growth outside AI-driven exports.
The tech sector is expected to benefit significantly from this monetary easing. Capital spending by cloud service providers continues to grow rapidly, and foundry leaders are running fabs at high utilization rates. If AI server products are delivered on schedule, the sector could see strong investment returns, paving the way for upward earnings revisions next year.
UBS has highlighted three key Taiwanese technology companies with strong investment potential for 2021: Taiwan Semiconductor Manufacturing Company (TSMC), MediaTek, and ASE Technology Holding. These firms are leaders in semiconductor manufacturing, chip design, and semiconductor assembly and testing, respectively. Their crucial roles in global supply chains and innovation leadership make them attractive targets for investors.
UBS non-tech analyst Ally Chen states that while the market is not cheap, valuations are not stretched. Such monetary support, according to Chen, would be positive for the broader market.
Looking beyond 2021, the rollout of 2-nanometer node technology and advanced chip packaging is expected to trigger a new investment cycle starting in 2027. Emerging areas such as silicon photonics and co-packaged optics are worth close attention, with multi-rack, scale-out architecture projected to take shape by 2028.
UBS semiconductor analyst Sunny Lin predicts that cloud AI demand could expand 30 percent next year, and non-AI segments might rebound 15 percent. As these trends continue to unfold, Taiwan's tech sector remains a promising investment opportunity for the future.
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