Taiwan: Trade War Is Difficult To Get Rid Of.

International economic situation:

US President trump plans to use HUAWEI as a bargaining chip to expand the ban on HUAWEI on the one hand, but also hopes to reach a trade agreement with China. On the other hand, China has also expressed its commitment to reaching an agreement, but it is also prepared to take more measures to counter it.

In addition, the EU will reject the US plan to restrict exports of EU Auto and auto parts with quotas, and deepen the spillover effect of the US China trade war.

Although foreign media believe that trump intends to make the outcome of the trade war as a backing for re-election, the US and China are expected to sign an agreement during the G20 period to avoid further warming of the trade war, but in the long run, the comprehensive risks brought by trade war have gradually become apparent, and the impact on the real economy needs to be further evaluated.

In the US side, the services and manufacturing PMI released by HS Markit in May were close to the edge of contraction. Meanwhile, the decline in core capital assets in durable goods orders in April showed that the enterprises showed doubts about the operational prospects, and the US and China trade war gradually increased the damage to the US economy.

In the minutes of the FOMC meeting, which was announced from April 30th to May 1st, Fed also pointed out that although the possibility of raising interest rates is still possible this year, the downside risks of the US economy still exist. Fed needs to be patient on the interest rate issue based on the uncertainty surrounding the global economic and financial development.

Considering the impact of recent Fed officials' warning on trade issues, the overall economic direction is still unclear. Therefore, interest rates will remain unchanged during the year unless there is a noticeable change in the economic situation in the second half.

In Europe, the PMI performance of euro zone manufacturing industry in May was still not ideal, and the investment confidence of the manufacturers in the 4 consecutive months was still lower than that in the euro area. The investment confidence of the manufacturers is still poor. It is estimated that the US postponed the EU tariffs for 180 days can only temporarily alleviate the concerns of the manufacturers. The continuation of the trade war will still affect the subsequent data performance.

In addition, the British Prime Minister May announced that he will leave office in June 7th, leaving the European deadlock unresolved and disorderly and hard to get rid of Europe's high probability. In addition, the Italian debt problem continues to ferment. Under the constant test of the political and economic situation, the market is generally concerned about how the ECB will adjust its economic forecast value in the second quarter and even the second half of the year at the June 6th meeting, and the new version of long-term refinancing operation, which is to be launched in September this year, will also become the focus of the conference.

Recently, the Taiwan stock market has been derogating from the spot chips and Taiwan dollar due to the reduction of foreign investment. The outflow of funds has obviously led to the lack of investor confidence. Especially in the face of trade war doubts, the supply chain dominated by electronic commerce is facing the headwinds. Before this situation is eased, the market is hard to rule out the long-term doubts. Therefore, at this stage, the market should be cautious.

Operation strategy:

Electronic shares suggest a second - quarter revenue opportunity to continue to grow, new product launch to drive operations upwards or this year's good stocks as the basis for investment.

Recommend ceramic circuit boards, batteries, Netcom, IPC, Hinge and PCB and other related stocks.

In terms of production allocation, textile and shoe material groups with high visibility and benefit from the US and China trade wars are the first choice.

In addition, the biotech group focuses on China's domestic demand for health food and medical beauty industry, which is not affected by Sino US trade. Bicycles are better than expected sales in Europe and America with E-Bike.

In terms of raw materials, China's infrastructure continues to be considered. Especially in Sichuan and Hubei, there are signs of expansion, which will help stabilize the price of cement in relevant areas and facilitate the performance of related stocks.