UBS Securities said that it has lowered its 2012 target for the Taiwan Stock Exchange (TAIEX) weighted average price index to 8,000 points from 8,550 points, taking into account uncertainties over the global economy.
In a research note, William Dong, head of research at UBS Securities Taiwan, said that after a recent slump, there are still few signs that the local bourse will make any immediate turnaround amid escalating fears over the debt crisis in the eurozone.
Dong said that a shrinkage in daily turnover has had an impact on market liquidity, a development that is expected to put local share prices under pressure over the short term.
Dong said he expects that cross-Taiwan Strait ties will not see any new breakthroughs in the second half of this year, as China is undergoing a once-in-a-decade power transition.
The analyst said further relaxation in trade and investment policies between Taiwan and China is unlikely to be realized until the second half of next year.
Despite the downgrading of the TAIEX target, Dong said his brokerage remains upbeat about stocks of selected high-tech firms that are expected to push up shipments in the third quarter on the back of the launch of new devices such as the Windows 8 operating system, Ultrabook computers and the iPhone 5.
UBS Securities has named PC vendor Asustek Computer Inc. and case supplier Catcher Technology Co. among the high-tech stocks the brokerage favors.
In addition, UBS Securities has issued an "overweight" recommendation on the local telecom sector due to its defensive nature.
The brokerage has added Chunghwa Telecom Co., one of Taiwan's top three telecom service operators, onto its "buy" list, while removing Taiwan Cement Corp., Vanguard International Semiconductor Co., and Yuanta Financial Holding Co.