Shares in Taiwan closed lower Wednesday as investors took advantage of an earlier rebound, pocketing profits amid lingering concerns over possible volatility on the U.S. markets despite an overnight rally, dealers said.
With the benchmark 10-year U.S. Treasury yield on the rise, the local bellwether electronics sector largely came under pressure, while a spike in international crude oil prices lent support to large cap petrochemical stocks, preventing the broader market from falling further, they said.
The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 67.59 points, or 0.41 percent, at 16,393.16, after moving between 16,303.63 and 16,568.21 during the day. Turnover totaled NT$287.48 billion (US$10.29 billion).
The market opened up 0.17 percent and soon reached the day’s high as buying was triggered by the gains on the U.S. markets, with the Dow Jones Industrial Average having risen 0.92 percent and the tech-heavy Nasdaq index having increased 1.25 percent on Tuesday, dealers said.
The early gain failed to be sustained as selling emerged in the wake of losses incurred on other regional markets such as Tokyo and Hong Kong to push the Taiex down to negative territory, dealers added.
The fall continued into the end of the session, while market heavyweights, in particular contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), were the target of last-ditch buying which helped recoup part of their earlier losses and lent some support to the broader market, dealers added.
“I think the rally on the U.S. markets overnight was just technical in nature and more volatility could come if Capitol Hill fails to reach an agreement to raise the debt ceiling by Oct. 18 to prevent the government’s default on its debt,” Nan Hua Securities analyst Kevin Su said.
U.S. Treasury Secretary Janet Yellen has said she believes the economy would fall into a recession if the debt ceiling is not raised before a default on the U.S. debt.
“So, the Taipei market simply joined its counterparts in Tokyo and Hong Kong in giving up earlier gains as many investors here feared more negative leads will come from overseas,” Su said.
The bellwether electronics sector fell 0.51 percent after its earlier upturn was reversed as higher interest rates made them look less attractive, Su said.
“Fortunately, TSMC, the most heavily weighted stock in the local market, recovered part of its earlier losses or the tech sector and the entire Taiex would have fallen further,” Su said.
TSMC fell 0.17 percent to close at NT$571.00 after coming off a low of NT$565.00. Dealers said the stock saw strong technical support ahead of NT$569.00, the 240-day moving average.
Other tech large cap semiconductor stocks suffered more losses with United Microelectronics Corp., a smaller contract chipmaker, declining 1.96 percent to end at NT$59.90, and dynamic random access memory chip supplier Nanya Technology Corp. falling 4.95 percent to close at NT$61.40.
Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co., second to TSMC in terms of market capitalization, bucked the downturn by rising 1.48 percent to end at NT$103.00 after the contract electronics maker reported a 46.41 percent year-on-year increase in consolidated sales for September.
“The fourth quarter is a traditional peak season for Hon Hai so today’s buying also reflected this upbeat mood,” Su said.
Su said the petrochemical sector rose 1.49 percent, on the back of rising crude oil prices, adding, “the major entities under the Formosa Plastics Group’s corporate umbrella simply led the sector in going higher.”
Among them, Formosa Petrochemical Corp. increased 2.63 percent to close at NT$101.50, Formosa Plastics Corp. rose 2.61 percent to end at NT$118.00, Formosa Chemicals & Fibre Corp. increased 1.58 percent to close at NT$83.50, and Nan Ya Plastics Corp. ended up 1.24 percent at NT$90.00.
“But, higher crude prices cut both ways. Shipping and airline stocks in the transportation sector came under pressure amid fears over rising costs,” Su said.
The transportation sector fell 4.96 percent, with container cargo shipper Evergreen Marine Corp. falling 5.05 percent to close at NT$97.80, and Wan Hai Lines Ltd. declining 6.65 percent to end at NT$161.50. In addition, China Airlines fell 2.35 percent to close at NT$16.65 and EVA Airways dropped 2.67 percent to end at NT$18.20.
In the steel sector, which fell 1.67 percent, adding pressure to the main board, China Steel Corp., the largest steelmaker in Taiwan, declined 1.54 percent to close at NT$35.05, and Chung Hung Steel Corp. dropped 2.44 percent to end at NT$38.50.
“How the U.S. markets will perform is expected to continue to dictate the global financial markets,” Su said. “We have to watch closely not only whether the U.S. debt ceiling will be raised by the deadline but also the U.S. Treasury yield movement.”
According to the TWSE, foreign institutional investors sold a net NT$23.86 billion worth of shares on the main board Wednesday.
Source: Focus Taiwan News Channel
