Best and worst performing stocks
Taiwanese equities (EWT) have gained momentum in 2017 as investors expect the technology sector to gain from a rising global demand for tech related products.
Stocks like Catcher Technology, Chailease Holdings, Hiwin Technologies, Largan Precision and Evergreen Margin have climbed 42.4%, 41.9%, 35.1%, 26.9% and 22.1% respectively in the year so far. In contrast, stocks Ruentex Industries, HTC, Eclat Textile, Obi Pharma and Fubon Financials have plunged 15.4%, 10.8%, 8.2%, 8.1% and 7.4% during the year so far.
Growth in all of the above-listed companies is a direct function of an increase in consumer spending. When demographics favor growth in consumption expenditure, revenues for these companies will grow, thereby leading to higher returns on the stock. However, market valuations for these successful companies are at levels which may not seem very attractive to new investors.
Valuations
Generally, stocks trade at an average price to earnings ratio of 20-25x. Stocks trading lower than their average price to earning multiples or lower than the sector average price to earnings multiples attract investor attention because they’re considered cheap. The price to earnings multiple compares a stock’s price to its forward earnings per share. If a company trades at a high PE, it means investors are anticipating higher growth in the future.
Stocks in the Taiwanese stock market trade at a one-year forward price to earnings ratio of 13.6x. Ruentex Industries (2915.TW), Ruentex Development (9954.TW), and China Airlines (2610.TW) are currently trading at inexpensive valuations compared to their peers. They have one-year forward price to earnings multiples of 5.3x, 6.7x and 7.7x respectively.
Meanwhile, Acer (2353.TW), Taimed Biologics (4147.TWO), President Chain Stores (2912.TW) are currently expensive. They have PE multiples of 39.1x, 30.6x, and 24.4x respectively.
