Taiwan shares close up on technical rebound but gains capped

Shares in Taiwan moved higher Friday on a technical rebound after a slump the previous session, but the upturn was limited amid lingering concerns over inflationary pressure in the United States markets, dealers said.

The bellwether electronics sector, served as a driver to the gains on the broader market, although contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) gave up its earlier gains, undermining the strength of the broader market, they said.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended up 65.61 points, or 0.38 percent, at 17,518.13, after moving between 17,479.55 and 17,602.05. Turnover totaled NT$366.96 billion (US$13.18 billion).

On a technical rebound from a 0.61 percent fall on Thursday, the market opened up 0.15 percent Friday and soon rose to the day's high with the electronics sector in focus following a 1.94 percent increase on the Philadelphia Semiconductor Index and a 0.52 rise on the tech-heavy Nasdaq index as investors ignored a 0.44 percent fall on the Dow Jones Industrial Average, dealers said.

However, TSMC, the most heavily weighted stock on the local market encountered profit taking after making initial gains, which limited the upturn of the broader market, while old economy stocks were mixed throughout the session, they said.

"Market sentiment stayed cautious amid fears that the U.S. Federal Reserve will speed up its rate hike cycle after the consumer price index in the United States jumped 6.2 percent from a year earlier in October, the highest growth in 30 years," Hua Nan Securities analyst Lu Chin-wei said.

"As interest rates are set to increase, tech stocks like TSMC will lose their luster," Lu said. "Moreover, higher U.S. rates will push up the greenback, which is expected to prompt foreign investors to move their funds back home and high-priced tech stocks here will get hurt."

TSMC fell 0.33 percent to close at NT$604.00, after coming off a high of NT$611.00. The electronics index rose 0.38 percent to end at 839.72, off a high of 845.76, with the semiconductor sub-index up 0.29 percent.

"After the chipmaker reported a double digit fall in sales for October from September, investors' became concerned about slow season effects in the fourth quarter of this year." Lu said.

In October, TSMC posted NT$134.54 billion in consolidated sales, down 11.9 percent from a month earlier. The October figure was the lowest monthly figure since July, when the company's revenue was NT$124.56 billion.

As the chipmaker did not revise down its fourth quarter guidance which has forecast fourth quarter sales will grow 4.5 percent from the third quarter, sales growth momentum could pick up in November and December.

"However, the first quarter next year remains a traditional slow season for the semiconductor industry. Profit taking focused on TSMC today simply showed concerns over next year, and it is possible the stock could test the NT$600 mark soon," Lu said.

With a weaker TSMC, buying rotated to other semiconductor stocks.

United Microelectronics Corp. was up 0.64 percent to close at NT$62.60, integrated circuit packaging and testing services provider ASE Technology Holding Co. rose 1.46 percent to end at NT$104.00, and IC designer MediaTek Inc. increased 3.04 percent to close at NT$983.00.

Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. rose 1.40 percent to end at NT$109.00, and PC brand Acer Inc. added 1.13 percent to close at NT$26.80.

Smartphone vendor HTC Corp., which has entered the virtual reality business by launching VR headsets, soared 10 percent to end at NT$90.90. The stock has surged 147 percent since the beginning of October amid the "metaverse" frenzy.

The so-called "metaverse" concept has been talked up by Meta (Facebook) CEO Mark Zuckerberg since July. It refers to a digital world where people can move between devices and communicate in a virtual environment.

Sentiment toward old economy stocks, in particular raw material suppliers, was undermined by worries over economic growth in China, which boasts the largest raw material consumption, Lu said.

The steel sector fell 0.59 percent with China Steel Corp., the largest steel maker in Taiwan, down 0.29 percent to close at NT$43.25, and Chung Hung Steel Corp. down 1.93 percent to end at NT$35.55.

On the other hand, shares in Formosa Plastics Corp. rose 1.90 percent to close at NT$107.50, and Grand Pacific Petrochemical Corp. gained 7.45 percent to end at NT$29.55 as crude prices stayed high.

"Investors now remain reluctant to chase prices even if the Taiex rebounds," Lu said. "It is possible the Taiex could fall below 17,500 points before rebounding above that level," Lu said.

According to the TWSE, foreign institutional investors bought a net NT$7.92 billion worth of shares on the main board Friday.

Source: Focus Taiwan News Channel