But there are a few stocks that offer value at current prices. If there is further correction due to problems in Southeast Asia, there might be more opportunities for bargains. To be sure, a glut is looming as China, Thailand, Malaysia and Indonesia complete new factories, posing challenges to established leaders Taiwan, Singapore and South Korea. If it is, there is a good chance of hitching a ride as a recovery begins. Over a two-year horizon, they look like great value.
Integration increases profit margins even when the entire sector is facing a small glut.
That is also one reason why Steven Liao of ABN Amro HG Asia Securities in Taipei likes Formosa stocks, especially Nan Ya. Formosa Plastics, says Leonard Hsueh of Nikko Research in Taiwan, will be the principal beneficiary of the naphtha projects. USI Far East's stock has been depressed because memory chip prices had fallen. Now that DRAM prices are stabilizing and with Vanguard going public soon, it is likely that USI Far East stock will gain. But Liao is wary about some manufacturers of resins and synthetic leather, such as San Fang Chemical Industry and Pony Leather.