Foreign Institutions Seen Continuing to Raise Stakes in Taiwan Equities; Impact of Japanese Disasters Not Expected to Halt Long-Term Positive Outlook

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Foreign institutional investors are expected to continue increasing their ownership of Taiwan-based equities in the coming months, as the market turmoil caused by the natural disasters in Japan appears to have resulted in a temporary interruption of a generally rising trend based on long-term fundamentals. This is a major conclusion of a research study just completed by LS Global Advisory Group, a leading provider of shareholder identification and market intelligence services on a global basis.

Foreign institutional investors are expected to continue increasing their ownership of Taiwan-based equities in the coming months, as the market turmoil caused by the natural disasters in Japan appears to have resulted in a temporary interruption of a generally rising trend based on long-term fundamentals. This is a major conclusion of a research study just completed by LS Global Advisory Group, a leading provider of shareholder identification and market intelligence services on a global basis.

Many foreign institutions continued to build their Taiwan equity positions even after the tragic events in Japan on March 11, taking advantage of the lower prices provided by the resulting sell-off. This group includes such large institutional investors as BlackRock, Wellington Management Co., Prudential Asset Management (Hong Kong) and Trilogy Global Investors, the exclusive LS Global research study showed.

Other institutions that were substantial buyers of Taiwanese stocks just prior to the Japanese disaster, held their ground and did not give way to selling pressure in the immediate aftermath of the earthquake and tsunami, the LS Global study revealed. These included such well-known names as Mondrian Investment Partners Ltd., Baillie Gifford & Co., Newton Investment Management Ltd. and Aviva Investors Global Services Ltd.

Foreign ownership in Taiwan stocks has increased steadily for much of the past year except for year-end 2010 profit-taking and a temporary drop in February this year on fears of inflation in emerging markets. The substantial year-over-year increase in holdings reflects a longer-term outlook for major growth in Taiwan’s exports, especially to supply the rising demand for components in the production of electronics, telecommunications, and computer products, as the global economy continues its recovery.

Major beneficiaries of this export demand include Taiwan Semiconductor Manufacturing Co., Hon Hai Precision Industry and HTC Corp., among others.

“Despite the remaining uncertainty in the region based on the effects of the disaster on the Japanese economy and supply chain impacts, it is clear that many institutional investors believe that Taiwan’s economy will grow substantially in the months and years to come,” said Lucas Scheer, president of LS Global Advisory Group, and a veteran analyst of institutional shareholder trends worldwide. “And many view the current situation as a buying opportunity to build their positions for themselves and their clients.”                    

Long-Term Optimism Evokes New Commitments

Optimism concerning the long-term outlook for Taiwan’s market has been strong for some time. More recently on March 9, just two days before the Japanese earthquake, a senior Asian equity strategist told CNBC that Taiwan was currently at an early stage of a multi-year bull market that could peak at twice its current level within two years.

Indeed, the upbeat view of Taiwan was so high at year-end that some institutions announced deals to increase their commitments. Here are three such deals:

  • In December, BlackRock Inc. announced that it had completed the acquisition of Primasia Investment Trust in Taiwan, a transaction that gave it the license to raise and run on-shore funds.

“We completed the purchase … in keeping with our plan to tap further into Asia’s fast-growing mutual fund market,” BlackRock managing director Chang Lin-yun said at the time. “An international study shows the market may expand 70% in four years, with Taiwan expected to see a 60% increase.”

The acquisition reflected Taiwan’s increasing importance in the region, and the company said it will adopt “a localization strategy” – i.e., recruiting and grooming more local fund managers to run funds, rather than channel local funds to invest abroad.

  • In January, Mirae Asset Global Investment, of South Korea, signed a memorandum of understanding to buy a 60% stake in TLG Asset Management, a subsidiary of Taiwan Life Insurance Company.
  • Even more recently, on March 9, UK-based Aviva Investors indicated it will soon launch three new products in Taiwan and strengthen its distribution team there after securing a Securities Investment Consulting Enterprise license from Taiwan’s Financial Supervisory Commission (FSC). The license allows Aviva to open a subsidiary in Taiwan and offer a range of products to both institutional and retail investors.

“To date, the markets seem to have discounted the supply chain and other economic and financial problems related to the Japanese disaster,” said Scheer. “Assuming this is correct, our research indicates that foreign institutions will be looking to further increase their holdings in Taiwanese equities in the coming months.”
About LS Global Advisory Group

LS Global Advisory Group is a leading provider of shareholder identification and market intelligence services on a global basis. This crucial information helps client companies to communicate more effectively with their current and prospective shareholders, as well as the investment community as a whole. Formed in 2006 by 20-year industry veteran Lucas Scheer, the firm has quickly become a leader in identifying institutional investors in corporate equities around the world. For assignments in many developed markets, LS Global typically identifies over 90% of the institutional ownership of a client company’s share capital – a track record that other industry firms find hard to duplicate. LS Global operates across all major industrial countries, and in addition to shareholder identification, it provides stock surveillance, institutional targeting, activist investor monitoring and consulting, and debt-holder identification services. For additional information about LS Global Advisory Group, please visit our website, http://www.LSGlobalAdvisory.com, or contact President Lucas Scheer at (212) 430-3782 or info(at)lsglobaladvisory(dot)com.

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