Taiwan Strategy:TAIEX keeps on climbing

The TAIEX was up 1.5% MoM in August, outperforming the region, andcontinuing its streak of all positive months YTD. August was the first month in2017 that non-tech outperformed (+2.1% MoM) tech. TAIEX/Tech/Nontech/Finanicals are up 14.4%/21.5%/6.4%/6.1% YTD.

The Taiwan dollar appreciated seven out of eight months in 2017 and is up6.4% YTD. The biggest currency mover in the region (N. Asia/Greater China)was the CNY, which was up 2%, and after four months of appreciation in arow is up over 5% YTD.

The foreign buying streak ended in July (US$8.5bn inflows in 1H17) versus acombined minor selling of US$300mn in July + August.

No change to our 2017 year-end TAIEX forecast of 10,800 (15.5x 2017earnings vs 10-year average 16x), and 2018 year-end forecast of 11,300 (15x2018 consensus estimates). Our NT$ forecast for 2017/18 is NT$30 per US$.

Key events in Taiwan this month are: 2017 Taipei Intn’l Industrial AutomationExhibition (Sept 6-9) and Semicon Taiwan (Sept 13-15).