TAIPEI: South Korean and Taiwanese stocks may outperform those in Indonesia and the Chinese mainland in the second half as corporate earnings will probably beat analysts' expectations, says Allianz SE, one of the world's largest financial service providers and Europe's largest insurer.

Singapore's economic rebound in the second quarter may point to an improving outlook for earnings among South Korean and Taiwanese technology-related companies, said Nikhil Srinivasan, who manages $20 billion as chief investment officer for Asia and the Middle East at Allianz SE.

"I'm biased towards Korea and Taiwan in the next six months, where we see companies upgrading their profit outlook and showing pricing power," he said in an interview in Singapore yesterday. "I'll pull back some exposure in markets such as Indonesia and the Chinese mainland, where expectations had been higher and the upside is in the price."

South Korea and Taiwan stocks trailed gains in the Chinese mainland and Indonesia, which are among the world's four best-performing markets this year. The Shanghai Composite Index has surged 76 percent as the government's stimulus plan and record bank loans boosted economic growth. The Jakarta Composite Index has climbed 57 percent on optimism prompted by President Susilo Bambang Yudhoyono's re-election for a second term last week.

Seoul-based Hynix Semiconductor Inc, the second-largest computer-memory maker, and MediaTek Inc, Taiwan's biggest chip designer, will benefit from a rebound in the US technology industry, Srinivasan said. Both stocks have more than doubled this year.

Intel Corp rose the most in four months on Wednesday after its revenue forecast topped analysts' estimates, indicating that shoppers in Asia are helping reignite demand for personal computers. Sales at the world's largest chipmaker will be as much as $8.9 billion in the current quarter, Intel said this week. That compares with an average estimate of $7.86 billion in a Bloomberg survey of analysts.

Global PC shipments fell 5 percent in the second quarter, about half the 9.8 percent drop expected, on consumer demand for netbooks and other low-priced machines, researcher Gartner said yesterday.

South Korea's Kospi index has gained 27 percent this year, while Taiwan's TAIEX index climbed 48 percent as ties with the mainland improved.

Bloomberg

(HK Edition 07/17/2009 page2)