Taiwan shares end up on U.S. rally after Fed’s meeting

Shares in Taiwan moved sharply higher by more than 120 points Thursday in the wake of a rally on the U.S. markets following the conclusion of the Federal Reserve's policymaking meeting, which ended market uncertainty, dealers said.

The bellwether electronics sector led the broader market to trend higher, as contract chipmaker Taiwan Semiconductor Manufacturing Co.'s (TSMC) stock returned to its prior ex-dividend level on the ex-dividend date.

The Taiex, the weighted stock on the Taiwan Stock Exchange (TWSE), ended up 125.64 points, or 0.71 percent, at 17,785.74, after moving between 17,719.06 and 17,814.32. Turnover totaled NT$311.65 billion (US$11.2 billion).

The market opened up 0.33 percent and momentum accelerated as investors took cues from the gains posted on the U.S. markets.

The Dow Jones Industrial Average rose 1.08 percent and the tech-heavy Nasdaq index gained 1.30 percent overnight.

This came in the wake of the Fed's announcement that it would speed up the pace of its downsizing of asset purchases, while also hinting at multiple rate hikes next year.

Buying later rotated to the electronics sector, accounting for almost 70 percent of Thursday's turnover with TSMC in focus.

Nontech stocks largely appeared muted amid minor gains, dealers added.

"The U.S. markets reacted to the Fed's conclusion in a positive manner, as the American central bank announced it would accelerate a reduction in asset purchases -- the so-called tapering," Hua Nan Securities analyst Lu Chin-wei said.

As the market had expected, the Fed left its key interest rates unchanged despite a quicker tapering, while hinting that it would raise interest rates three times next year.

"The hints for a rate hike cycle did not turn away investors. I think such a hawkish manner indicated the Fed has been bullish about the economy," Lu said. "Moreover, the rate hikes showed the Fed will take on the growing inflationary pressure in the U.S., which is good for the economy."

Encouraged by the positive sentiment on the U.S. markets, Lu said buying emerged on the local main board soon after the market opened, with the electronics sector in focus.

"Thanks to TSMC, the tech sector regained the status as the mainstream sector on the main board, helping the Taiex breach the 17,800 point level at one point in the morning session," Lu said.

TSMC, the most heavily weighted stock in the local market, rose 1.34 percent to close at the day's high of NT$605.00 on the ex-dividend date before the Jan. 13, 2022 payment of NT$2.75 in cash dividend per share for its earnings recorded in the second quarter of this year.

For companies in Taiwan that largely issue cash dividends annually, the ex-dividend date is the date on which a stock begins trading, minus the amount of the cash dividend to be paid out on the previous year's earnings.

Beginning in 2019, TSMC started to issue its cash dividend on a quarterly basis instead of annually.

"The strong interest in TSMC came from optimism toward the company's outlook in the current global chip shortage worldwide and a boost from the U.S. rally," Lu said. "But, technically speaking, the stock could see stiff technical resistance ahead of NT$620.00."

Led by TSMC, the electronics sector rose 1.03 percent with the semiconductor sub-index up 1.30 percent.

Buying was seen among other semiconductor stocks, with smartphone chip designer MediaTek Inc. up 2.83 percent to close at NT$1,090.00 and Novatek Microelectronics Corp., which supplies drive ICs for flat panels, up 4.30 percent to end at NT$543.00.

Also in the tech sector, iPhone assembler Hon Hai Precision Industry Co. bucked the upturn, falling 1.43 percent to close at NT$103.50, while flat-panel maker AU Optronics Corp. extended its strong showing from a session earlier to grow 1.09 percent and end at NT$23.15.

"Non-tech stocks largely lost luster and lagged behind their electronics counterparts as they were outside the spotlight throughout the trading session," Lu said.

Among them, container cargo shipper Wan Hai Lines Ltd. lost 1.26 percent to close at NT$196.50, and rival Yang Ming Marine Transport Corp. fell 0.41 percent. Evergreen Marine Corp., meanwhile, rose 2.17 percent to close at NT$141.00.

In the steel sector, China Steel Corp., the largest steelmaker in Taiwan, rose 0.29 percent to end at NT$34.33, while Chung Hung Steel Corp. lost 1.38 percent to end at NT$39.40.

"Despite the gains in the Taiex, turnover remained moderate as many foreign institutional investors have been away for the Christmas holiday," Lu said. "Without expanded turnover, I do not think it will be easy for the main board to jump over the high technical hurdles ahead of 18,000 points soon."

According to the TWSE, foreign institutional investors sold a net NT$2.57 billion worth of shares on the main board Thursday.

Source: Focus Taiwan News Channel