(Bloomberg) -- The top-performing Taiwanese fund manager for the past year is pushing deeper into technology in 2019 as the island looks set to benefit from trade tensions.
Makers of chips, lenses and other components of smartphones are likely to offer high growth opportunities this year, Corrina Xiao of Allianz Global Investors Taiwan said in an interview. Her biggest investment as of the end of November was Taiwan Semiconductor Manufacturing Co., the exclusive maker of iPhone processors.
Tensions between President Donald Trump and his Chinese counterpart Xi Jinping has hit confidence in Taiwan’s technology sector as its companies weigh the future of manufacturing bases on the mainland. Xiao said the U.S. pressure will work to level the playing field with China and open up opportunities for local businesses as they relocate.
“Taiwan companies are relatively small, and they are nimble and flexible and they can move their facilities back to Taiwan or to Southeast Asia very fast,” she said. “After the adjustments, Taiwan will be a market with good potential.”
Xiao’s is one of two Allianz Global Investors Taiwan funds that were the only ones to deliver a positive return for 2018 out of 44 Taiwan-domiciled asset pools surpassing NT$1 billion ($33 million), and that invest at least half their assets locally, according to data compiled by Bloomberg. Xiao’s fund gained more than 3 percent -- the best of all 44 -- compared with a decline of about 9 percent for the benchmark Taiex index.
“I really like what Trump is doing. What he is pushing for is fair and just, especially for Taiwan,” Xiao said in the Dec. 21 interview at Bloomberg’s Taipei office. “Taiwanese companies have been hurt because their Chinese rivals have been receiving a lot of subsidies from the Chinese government. The playground has been very unfair in the context of free trade.”
Xiao has NT$3.73 billion of assets under management, with NT$3.31 billion in the Allianz Global Investors Taiwan Fund and the rest in the Allianz Global Investors Taiwan Intelligence Trends Fund.
While she didn’t name the specific companies she is looking at, Xiao did say she wanted to increase her stake in Taiwan’s semiconductor sector by the end of June. According to Allianz Global Investors Taiwan’s website, she had 8.76 percent of her fund in TSMC at the end of November, making the contract chipmaker her biggest investment.
Xiao’s next four largest holdings were Formosa Plastics Corp., Taiwan Cement Corp., Faraday Technology Corp. and Largan Precision Co. as of the end of November, according to Allianz data.
“I am optimistic about Taiwan’s semiconductor and tech stocks because human beings are constantly chasing faster speed and better power efficiency, and these can only be achieved with advanced semiconductor process technology,” she said.
Xiao’s performance in 2018 was underpinned by a decision to quit stakes in Taiwanese parts suppliers for traditional carmakers at the end of the third quarter, as her team predicted they would be among the first hit by the trade war.
Other winning moves included a stake in Yageo Corp., a maker of resistors that rose 8.3 percent last year, as well as Walsin Technology Corp., a maker of ceramic electronic components that surged 47 percent, according to data compiled by Bloomberg.
But she kept investments in the electric car sector, a decision now she regrets.
“We felt in the long run, electric cars will see their penetration rate grow even if the whole car market shrinks. Looking back, we see that electric carmakers have also been affected.”
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