Goldman Sachs Report
"Korea and Taiwan Tech Stocks
Expected to Give Back This Year's Gains"
As fears of a domino effect of financial sector bankruptcies triggered by the US Silicon Valley Bank (SVB) spread, Goldman Sachs has forecasted that the stock markets in South Korea and Taiwan could be hit.
According to Bloomberg on the 19th, US investment bank Goldman Sachs predicted, "This year, technology stocks in South Korea and Taiwan have risen excessively, centered on hardware."
Timothy Mo, a strategist at Goldman Sachs, explained, "These stocks appear to be particularly vulnerable to the shocks from stress in the US financial sector," adding, "Taiwan and information technology sector stocks are more sensitive to the US financial situation and economic growth than most of the Asia-Pacific region excluding Japan." He further analyzed, "The recent macroeconomic phase has not been reflected in the stock prices of these regions, including South Korea."
While the MSCI Asia-Pacific stock index has declined this week, South Korea's KOSPI index and Taiwan's TAIEX index have shown relatively smaller drops. The two countries' stock prices have held up better compared to major regions this year, buoyed by expectations that the semiconductor industry will soon hit bottom and recover. However, with the recent spread of fears about instability in the global financial system, there is a possibility that the gains made so far could be given back.
On the other hand, Goldman Sachs viewed stocks in India and Thailand as promising. They also had a positive outlook on the utilities and consumer goods sectors, which had been sluggish due to macroeconomic uncertainties.
SVB, which had been lending to tech companies in Silicon Valley, US, filed for bankruptcy on the 10th (local time), spreading fear across global financial markets. Companies facing difficulties in raising funds due to the US Federal Reserve's interest rate hikes have been withdrawing deposits one after another, causing liquidity crises for small and medium-sized banks. Following SVB, Signature Bank went bankrupt on the 12th, and with First Republic Bank also on the brink of closure, 11 major US banks injected $30 billion in emergency funds on the 16th. The fear of instability in the US financial system spread to Europe, engulfing Credit Suisse (CS) in crisis rumors. Although the Swiss National Bank (SNB) lent $54 billion to stabilize the situation, the anxiety has not subsided.
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