Market Quote: Taiwan’s Record High, Energy M&A, U.S. Government Shutdown
Author: The editor's desk
February 28, 2024
A mid-week analysis of what’s happening in global financial markets from the perspective of AGF’s investment management team.
Good Conduct
Investor excitement over artificial intelligence (AI) is not exclusively centered around big U.S. technology stocks. The MSCI Taiwan Index has advanced to a record high this year and is up more than 7% year-to-date, largely driven by a significant 18% return in shares of the country’s most critical global supplier of AI chips.
The growing global demand for the semiconductors that fuel AI technologies has underpinned Taiwan’s sharp growth recovery, taking it from -3.5% GDP growth in the first quarter of 2023 to 5.12% in the fourth quarter of last year. We believe this could translate into more opportunities for potential gains in the Taiwanese index going forward.
Acquired Taste
The energy sector has experienced an upshift in M&A activity over the past few months, particularly in the U.S. where some well-capitalized companies are choosing to expand inorganically now that high-quality U.S. shale acreage is slowly drying up and the pace of exploration has been unable to replenish these resources adequately. We believe this consolidation trend is likely to continue given the energy sector’s generally healthy cashflows and the fact that it is less leveraged—on average—than in the past.
Although M&A activity has thus far been limited mostly to the U.S. energy sector, we believe there’s growing potential for a spillover north of the border. Overall, Canada’s energy sector continues to screen attractively from both valuation and inventory standpoints and some of the country’s smaller-capitalization companies with high-quality inventory positions may find themselves in the driver’s seat when it comes to potential consolidation going forward.
Deal or No Deal?
It’s increasingly doubtful that Congress will reach budget deals by the March 1 and March 8 deadlines, which means a government shutdown is looking likely, starting this Friday night.
A month ago, we thought chances of a shutdown were about 25%. Last week it looked like 40%. Now it appears likely – perhaps 60% – that there will be no deal by Friday and possibly many days longer.
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The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.
Commentary and data sourced from Bloomberg, Reuters and other news sources unless otherwise noted. The commentaries contained herein are provided as a general source of information based on information available as of February 28, 2024 and are not intended to be comprehensive investment advice applicable to the circumstances of the individual. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Market conditions may change and AGF Investments accepts no responsibility for individual investment decisions arising from the use or reliance on the information contained here.
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Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. Our companies deliver excellence in investing in the public and private markets through three business lines: AGF Investments, AGF Capital Partners and AGF Private Wealth.
AGF brings a disciplined approach, focused on incorporating sound, responsible and sustainable corporate practices. The firm’s collective investment expertise, driven by its fundamental, quantitative and private investing capabilities, extends globally to a wide range of clients, from financial advisors and their clients to high-net worth and institutional investors including pension plans, corporate plans, sovereign wealth funds, endowments and foundations.
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