Taiwan shares end down as earlier gains eroded; TSMC shares fall

Taipei, Aug. 20 (CNA) Shares in Taiwan closed lower Friday after giving up earlier gains amid lingering concerns over a possible move by the U.S. Federal Reserve to cut asset purchases later in the year, dealers said.

The bellwether electronics sector fell into negative territory with contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) facing growing downward pressure in the late trading session despite a report saying Intel Corp. is outsourcing production to the Taiwanese firm, they said.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 33.46 points, or 0.20 percent, at 16,341.94 after moving between 16,248.08 and 16,507.11. Turnover totaled NT$347.82 billion (US$12.42 billion).

The market opened up 0.31 percent and soon rose to the day's high on a technical rebound from a 2.68 percent plunge a session earlier. TSMC attracted strong buying in the wake of a Reuters report which said Intel has established a partnership with the Taiwanese chipmaker by outsourcing production, dealers said.

However, selling followed and the broader market seesawed for the rest of the session before the downward pressure on TSMC increased late on, pushing the electronics sector as well as the broader market to below their previous closing levels by the end of trading, dealers added.

"After yesterday's sell-off, market sentiment has been hit hard," Hua Nan Securities analyst Lu Chin-wei said. "Many investors at home and abroad have growing concerns that the Fed will start to downsize its quantitative easing this year."

Such concerns were raised by Wednesday's release of the minutes of the last Fed policymaking meeting in July, which hinted that the American central bank would start cutting bond purchases later in the year.

"The U.S. dollar is gaining its footing so foreign institutional investors have started to move their funds from non-greenback assets. In Taiwan, liquid stocks like TSMC have become their target," Lu said.

After hitting the day's high of NT$563.00 in the early morning session, TSMC came under pressure and closed down 1.25 percent at NT$552.00 despite the Intel report.

According to Reuters, Intel detailed its partnership with TSMC overnight, outsourcing production to the Taiwanese manufacturer in a bid to defend its market share against competition from Advanced Micro Devices Inc. and NVidia Inc.

Reuters said Intel will use TSMC's advanced 5 nanometer and 7nm processes to roll out its Ponte Veechio chip and Alchemist graphics chips, while TSMC declined to comment on the report.

"Amid the current fragile sentiment, it was no surprise that TSMC's initial technical rebound was followed by selling. A similar movement was also seen on the Taiex," Lu said. TSMC shared dropped 2.61 percent on Thursday.

Led by TSMC, the electronics sector ended down 0.48 percent with the semiconductor sub-index down 0.74 percent.

Among other semiconductor stocks, shares in United Microelectronics Corp., a smaller contract chipmaker, rose 0.36 percent to close at NT$55.70, but came off a high of NT$56.40, while integrated circuit designer MediaTek Inc. lost 1.69 percent to end at NT$873.00.

Bucking the downturn, iPhone assembler Hon Hai Precision Industry Co., a market laggard, rose 1.46 percent to close at NT$104.50, and its metal casing subsidiary Foxconn Technology Co. gained 2.17 percent to end at NT$65.90.

"Investors also continued to cut their holdings in select old economy stocks, pushing down the Taiex further," Lu said.

In the petrochemical sector, which lost 1.12 percent after international crude oil prices overnight dipped to the lowest level since May due to the stronger greenback, Formosa Plastics Corp. lost 0.93 percent to close at NT$95.80, Formosa Chemicals & Fibre Corp. fell 1.37 percent to end at NT$79.10, and Nan Ya Plastics Corp. shed 2.50 percent to close at NT$81.90. But, Formosa Petrochemical Corp. rose 0.22 percent to end at NT$91.30.

Some major shipping stocks outperformed the broader market with Taiwan's largest container cargo shipper Evergreen Marine Corp. up 3.52 percent to close at NT$132.50. Rivals Yang Ming Marine Corp. and Wan Hai Lines Ltd. rose 3.16 percent and 5.87 percent, respectively, to end at NT$130.50 and NT$225.50 after the Cabinet finalized a plan Thursday to extend a transaction tax cut for day trading an additional three years after it expires at the end of this year.

Shipping stocks had been favored by local investors who were keen on day trading, a practice in which investors buy and then sell the same stock or sell and then buy the same stock in one single session.

"More losses on the Taiex are possible as foreign funds continue to exit the regional markets due to a rising U.S. dollar," Lu said. "As foreign institutional investors keep cutting their holdings, it is hard to say where the nearest technical support will be."

According to the TWSE, foreign institutional investors sold a net NT$14.51 billion worth of shares on the main board Friday.

Source: Focus Taiwan News Channel