Four Pillars of GDP: Driven by private consumption

Taiwan’s GDP has been growing at a slow pace of late, 2.4% in the most recent quarter. Private consumption and investment have been the main contributors to GDP growth, but exports have put a slight drag on overall growth.

Good profitability and the highest dividend in Asia

Taiwan has had the third highest ROE in Asia in the past 12 months, and EPS growth is expected to be close to 12% this year.

Considering the profitability the price-to-book value is not expensive versus other Asian markets.

At 3.9%, Taiwan has the highest expected dividend yield in 2017.

A. Stotz Four Elements: Taiwan’s rank relative to Asia

Overall, Taiwan is moderately attractive in Asia, considering all our four elements: Fundamentals, Valuation, Momentum, and Risk.

Fundamentals: Taiwan has had the third highest ROE in Asia in the past 12 months.

Valuation: Taiwan offers the highest dividend yield in Asia and a moderate valuation based on price/book.

Momentum: Taiwan offers below-average earnings growth and decent price momentum.

Risk: The market’s beta is relatively high compared with Asia ex-Japan.

Industrials have seen the largest stock gains in 3Q17

Top 3 largest sectors: Information Technology: 50% of the market; Financials: 12%; Materials: 10%.

Best sector & stock: Industrials: +5.4% & Hiwin Technologies Corp.: +35.7%.

Worst sector & stock: Real Estate: -4.9% & Highwealth Construction Corp.: -18.2%.

*CE is consensus estimates