TAIPEI (Reuters) - The dip in Taiwan’s stock market following the launch of the iPhone X may be a mere pause before more rallies to come as suppliers of Apple Inc. reap the benefits of Apple’s newest smartphones, said an executive of Taiwan’s biggest fund house.
Jeff Chang, chairman of Cathay Securities Investment Trust, sees the much-anticipated release of the iPhone 8 and iPhone X as having tremendous upside to bolster earnings potential of suppliers, driving up their share prices and the overall market, already a top performer in the region this year.
Chang’s confidence is such that he said his firm intends to increase its already substantial exposure to Taiwan’s Apple suppliers.
“We are so bullish on Apple suppliers that they already comprise 30 percent of our portfolio, and we plan to increase that,” the chairman of Cathay, which manages T$500 billion ($16.7 billion) in client assets, told Reuters in an interview.
“Shares of Apple suppliers are the most important holdings that Taiwan’s fund industry must have in their portfolios,” Chang said.
Apple rolled out its iPhone X, a glass and stainless steel device with an edge-to-edge display that Chief Executive Tim Cook called “the biggest leap forward since the original iPhone.” The company also unveiled the iPhone 8 and iPhone 8 Plus, which resemble the iPhone 7 line but have a glass back for wireless charging and other new features.
Since the launch, the Taiwan market and shares of Apple suppliers including Largan Precision have pulled back as some analysts expressed concerns the launch had been priced in, and offered few surprises, while the iPhone X’s $999 price tag might be prohibitively expensive.
But Chang takes a different view, and suggests that the dip following the launch may only be an intermission before another rallying act for the Taiwan market.
“These stocks have staged quite a rally. They usually pull back by 10 percent following product launches,” said Chang, 51. The chairman said he expects the new iPhones to drive shipments of up to 300 million units by December 2018, exceeding Apple’s current annual shipment rate.
Apple’s smartphones have been a major factor in Taiwan’s stock market and its export-driven economy, as the U.S. firm gets many of its components from Largan, Hon Hai Precision Industry and Taiwan Semiconductor Manufacturing Co (TSMC). “We think the new iPhones will be a big hit,” Chang said.
The broader market rose 14 percent so far this year, while TSMC, the world’s largest contract chip maker, jumped 20 percent, Largan surged nearly 50 percent and Hon Hai rose 36 percent.
Editing by Toby Chopra