Apple’s next iPhone and robot cars top picks for Taiwan’s best tech fund

Allianz Global Investors Taiwan predicts next smartphone from Apple will be among the hottest trades this year along with technology for self-driving cars.

Apple's iPhone 7 boosted exports last year for Taiwanese tech firms and the nation's top tech fund says the next version will provide a similar boost this year. Issei Kato / Reuters

For Taiwan’s top-performing technology fund, Apple’s next iPhone and self-driving cars are the hottest trades for 2017.

Bullish bets that iPhone orders will boost earnings at the island’s many suppliers have helped drive Taiwan’s benchmark stock gauge to a one-and-a-half-year high, while foreign investors have pumped US$1.5 billion into local shares this year, the most among Asian markets tracked by Bloomberg.

“The biggest theme this year will be the iPhone,” said Peter Liao, a fund manager at Allianz Global Investors Taiwan. He singled out companies that make devices supporting wireless charging and augmented reality, which may be new features in the next iPhone.

Mr Liao’s Allianz Global Investors Taiwan Technology Fund has a total return of 28 per cent in the past 12 months, the top performance among 49 peers, and almost double the Taiex’s 17 per cent gain. The fund’s largest holdings at the end of last year were Taiwan Semiconductor Manufacturing, Largan Precision and Hon Hai Precision Industry – all Apple suppliers.

The iPhone 7’s release last year was a boost to Taiwan’s exports. Shipments snapped a 17-month run of declines in July and climbed at the fastest pace since 2013 in December, while industrial production has also been on a steady uptrend in the past year.

Equity inflows have also helped lift the Taiwan dollar, which has rallied 4.7 per cent against the greenback this year. The island’s currency added 0.4 per cent to 30.94 per dollar mid-afternoon in Taipei, while the Taiex climbed 0.9 per cent to its highest close since June 2015.

Among the fund’s top holdings, Tong Hsing Electronic Industries manufactures products that can be used in self-driving systems. This technology is likely to undergo “gradual upgrades” in features such as impact prevention and automated parking, according to Mr Liao.

He predicts a diversified market where small caps advance amid accelerating earnings growth, whereas heavyweights with steady dividend yields could underperform as US interest rates rise. Small and mid caps accounted for four of the five stocks with the highest contribution to Allianz Global Investors Taiwan Technology Fund’s return in 2016, according to Bloomberg.

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Mona Al Marzooqi / The National

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* Bloomberg

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