Taiwan shares end lower although short-selling rules tightened

Shares in Taiwan extended losses from a session earlier to fall by more than 120 points on Monday, although the Financial Supervisory Commission (FSC), the top financial regulator in the country, announced measures at the end of last week to tighten short-selling rules amid global volatility, dealers said.

 

As fears over a hawkish Federal Reserve in its rate hike cycle continued to push down U.S. markets on Friday, tech heavyweights in Taiwan remained in a vicious downtrend to lead the local main board to move lower, dealers added.

 

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 124.10 points, or 0.92 percent, at 13,300.48 after moving between 13,273.48 and 13,440.23. Turnover totaled NT$167.77 billion (US$5.26 billion).

 

The market opened down 0.49 percent in the wake of a 1.71-percent fall on the Dow Jones Industrial Average and a 1.51-percent drop on the tech-heavy Nasdaq index on Friday that reflected growing concerns over aggressive rate hikes by the Fed, dealers said.

 

Selling continued with large-cap semiconductor stocks in focus to push down the Taiex to the day’s low in the early morning session before some bargain hunters emerged to vault the index past the previous closing level at one point after 10 a.m., dealers added.

 

However, investors again shifted to the sell side, especially in the afternoon session, to drag down the Taiex to negative territory, as the market’s weak performance continued into the end of the session, dealers added.

 

“Despite the FSC’s move to curb short selling, the local stock market still could not isolate itself from the heavy losses on the U.S. markets,” Cathay Futures Consultant analyst Tsai Ming-han said.

 

Tightened short selling rules

On Friday, the FSC announced that the volume of intraday security lending that can be used for the short selling of a stock had been cut to 20 percent of the stock’s average daily trading volume over the previous 30 trading sessions, down from 30 percent.

 

In addition, the FSC has also raised the required deposit for securities borrowing by an investor to 100 percent of a stock’s value from the previous 90 percent, a move which will raise costs for investors who want to short the market.

 

Compared with the FSC’s previous short-selling tightening measures, Friday’s announcement appeared mild, Tsai said, but the move signaled to those who wanted to short the market that “I am watching you” and “behave yourselves.”

 

“I expect more tightening to come if volatility continues,” Tsai said, referring to the previous tightening rules such as a ban on short selling when a stock closes lower in the previous session.

 

Tech stocks

The bellwether electronics sector served as a driver for the downturn on the broader market, falling 1.05 percent with the semiconductor sub-index down 1.10 percent, Tsai said.

 

“With foreign institutional investors moving more of their funds out of the country, liquid large-cap semiconductor stocks again fell victim to fund flight,” Tsai said.

 

Contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock in the local market, fell 1.18 percent to close at NT$417.00, and United Microelectronics Corp., a smaller contract chipmaker, fell 1.12 percent to end at NT$35.35.

 

Among other semiconductor stocks, ASE Technology Holding Co. dropped 3.75 percent to close at NT$77.10, dynamic random access memory chip supplier Nanya Technology Corp. fell 2.86 percent to end at NT$47.55, and application-specific IC (ASIC) designer Alchip Technologies Ltd. fell 1.15 percent to close at NT$857.00, while smartphone IC designer MediaTek Inc. appeared resilient, falling only 0.54 percent to end at NT$548.00.

 

Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. fell 0.98 percent to close at NT$101.00, but Yageo Corp., the world’s third-largest multi-layer ceramic capacitor (MLCC) maker, bucked the downturn, rising by 4.46 percent to end at NT$281.00.

 

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Financial, shipping firms

The financial sector fell by 1.55 percent as concerns ran deep that financial firms would see their asset value eroded by falling bond prices amid rising interest rates. In the sector, Cathay Financial Holding Co. decreased 2.38 percent to close at NT$39.00 and Fubon Financial Holding Co. fell 2.00 percent to end at NT$48.90.

 

Outperforming the Taiex, the transportation sector rose 2.08 percent as several foreign container cargo shippers such as Denmark-based Maersk reportedly have cut services in a bid to stop falling freight rates, dealers said.

 

Evergreen Marine Corp., the largest container shipper in Taiwan, increased 2.40 percent to close at NT$149.50, and rivals Yang Ming Marine Transport Corp. and Wan Hai Lines Ltd. rose 3.25 percent and 5.24 percent, respectively, to end at NT$63.50 and NT$70.30.

 

Buying also spread to bulk cargo shippers with Chinese Maritime Transport Ltd. up 2.29 percent to close at NT$33.45, and U-Ming Marine Transport Corp. up 2.33 percent to end at NT$37.35.

 

“It is hard to say where the Taiex will find its nearest technical support as long as the U.S. dollar continues to move up against the Taiwan dollar,” Tsai said. “I suggest investors stay on the sidelines for now.”

 

According to the TWSE, foreign institutional investors sold a net NT$9.37 billion worth of shares on the main board Monday.

 

 

 

Source: Focus Taiwan News Channel