Shares in Taiwan fell to their lowest in two years Tuesday as investors scrambled to dump large cap electronics stocks in the wake of heavy losses suffered by the tech sector on U.S. markets in the previous two trading sessions, dealers said.
With local trading resuming Tuesday after the long National Day holiday, worries over a hawkish Federal Reserve returned to haunt the bellwether electronics sector in which contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) shed more than 8 percent, leading the downturn, they said.
In addition, an announcement by the U.S. Department of Commerce at the end of last week that it would expand restrictions on exports of IC and related production equipment also placed downward pressure on the local tech sector, dealers said.
The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 596.25 points, or 4.35 percent, at the day’s low of 13,106.03 after coming off a high of 13,394.12. Turnover totaled NT$217.76 billion (US$6.83 billion).
The market opened down 2.25 percent as investors took their cue from a 4.7 percent drop on the tech-heavy Nasdaq index and a 9.2 percent tumble on the Philadelphia Semiconductor Index on Friday (Oct. 7) and Monday (Oct. 10) in the wake of strong U.S. jobs data for September and the newly imposed IC export ban, dealers said.
Selling focused on large semiconductor stocks, in particular TSMC, the most heavily weighted stock on the local market, and then spread to the non-tech sector, with the weakness continuing until the end of the session, pushing the Taiex to its lowest level since Nov. 10, 2020, when the benchmark index closed at 13,081.72, dealers said.
“The strong U.S. jobs data, which indicated the economy remains unscathed despite recent rate increases, has caused investors at home and abroad to think the Fed will continue to act aggressively to carry out its rate hike cycle to fight inflation,” Cathay Futures Consultant analyst Tsai Ming-han said, referring to the September U.S. jobless rate, which fell from 3.7 percent in August to 3.5 percent, pointing to a tight job market.
“Worries are running deep that the Fed will raise its key interest rates by an additional 75 basis points in November,” Tsai said, adding “it was no surprise that tech stocks on the local main board and on U.S. markets fell victim to rate hike concerns.”
The sell-off concentrated on TSMC, which lost 8.33 percent to close at NT$401.50, and its losses contributed about 300 points to the Taiex’s decline and led the electronics sector and the semiconductor sub-index lower by 5.80 percent and 7.58 percent, respectively.
“Semiconductor stocks also felt the pinch from the U.S. government’s move to expand its restrictions on IC exports to China. At a time when the global semiconductor industry faces inventory adjustments, such a move is expected to make the situation worse,” Tsai said.
“Today, I suspect, foreign institutional investors continued to cut their holdings in the tech sector and moved their funds out of the local market for U.S. dollar-denominated assets,” Tsai said.
According to the TWSE, foreign institutional investors sold a net NT$34.28 billion worth of shares on the main board Tuesday after net sales of NT$9.28 billion on Friday.
Among other semiconductor stocks, TSMC’s application-specific integrated circuit design subsidiary Global Unichip Corp. plunged 10 percent, the maximum daily decline, to end at NT$548.00., IC packaging and testing services provider ASE Technology Co. shed 9.02 percent to close at NT$74.60, and smartphone IC designer MediaTek Inc. lost 2.30 percent to end at NT$553.00.
United Microelectronics Corp. (UMC), a smaller contract chipmaker, lost 6.96 percent to close at NT$35.40, while its display IC design subsidiary Novatek Microelectronics Corp. appeared resilient, falling only 0.84 percent to end at NT$236.50.
Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. lost 3.26 percent to close at NT$104.00, while flat panel makers AU Optronics Corp. and Innolux Corp. bucked the downturn, rising 3.79 percent and 9.05 percent, respectively, to end at NT$16.45 and NT$11.45 after trading in their shares resumed Tuesday following a pause on Sept. 29 due to a capital reduction.
“Cautious sentiment was seen across the board with no other single sector isolating themselves from the sell-off, which added downward pressure to the Taiex throughout the session,” Tsai said.
The financial sector lost 2.28 percent as investors fear falling bond prices overseas will drag down the value of their assets which include foreign debt investments, dealers said.
In the sector, Fubon Financial Holding Co. lost 2.37 percent to close at NT$49.50, and Cathay Financial Holding Co. fell 2.22 percent to end at NT$39.60.
Among falling old economy stocks, container cargo shipper Yang Ming Marine Transport Corp. lost 2.15 percent to close at NT$63.70, and rival Wan Hai Lines Ltd. fell 1.37 percent to end at NT$72.20.
In addition, China Airlines shed 4.18 percent to close at NT$19.50, and EVA Airways lost 3.60 percent to end at NT$28.10.
“After today’s dive, the local main board has become technically fragile. As rate hike concerns continue, there is no indication where the Taiex will find the nearest technical support,” Tsai said. “In particular, inventory adjustments are expected to add to the selling of semiconductor stocks and it is very possible TSMC could test the NT$400 mark soon.”
Source: Focus Taiwan News Channel