Shares in Taiwan encountered headwinds Tuesday, with the Taiex down 177.59 points amid overnight losses for U.S. markets and growing inflation concerns.
Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 1.07 percent at 16,462.84 after moving between 16,349.49 and 16,589.72, with dealers citing old economy stocks — in particular shipping — for the drop.
Turnover totaled NT$278.299 billion (US$9.89 billion) and losses on the broader market capped after the bellwether electronics sector rallied from an earlier downturn with the help of late session buying.
The market opened down 0.30 percent and moved to the day’s low after falling almost 300 points around 9:30 a.m.
Buying was sparked by a 0.70 percent decline on the Dow Jones Industrial Average and a 0.6 percent fall on the tech-heavy Nasdaq index overnight. This came after a spike in international crude oil prices, which dealers said had raised concerns over inflation.
Selling was seen almost across the board, with shipping stocks in focus.
In the tech sector, contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) saw last ditch buying in an attempt to recoup earlier losses and limit the Taiex’s downturn by the end of the session.
Concord Securities analyst Kerry Huang said: “Volatility on the U.S. markets dampened market confidence here, so the local main board came under pressure soon after the market opened and the weakness continued into the end of the session.
“Growing international crude prices raised worries about inflation and also boosted fears over the impact on a global economic recovery amid COVID-19.”
Overnight, U.S. West Texas Intermediate (WTI) crude rose 1.50 percent, while Brent crude, the global benchmark, was also up by the same amount.
Huang said that non-tech stocks were the target of Tuesday’s selling, led by the shipping industry.
The transportation sector, where many major shipping stocks are traded, plunged 7.55 percent.Container cargo shipper Yang Ming Marine Transport Corp. ended down 9.71 percent to close at NT$87.40, with Evergreen Marine Corp. down 9.50 percent at NT$90.50, Wan Hai Lines Ltd. down 9.44 percent at NT$153.50.
In addition, bulk cargo shipper U-Ming Marine Transport Corp. down 10 percent — the maximum daily decline — at NT$65.70.
“Retail investors favored margin trading to buy shipping stocks and now heavy losses among these stocks brew margin calls, leading investors to cut their holdings,” Huang said.
Huang added that, to his knowledge, Evergreen Marine shares sat on more than NT$30 billion in margin trading, paving the way for more potential margin calls.
A margin call occurs when the value of an investor’s margin account falls below the broker’s required amount, requiring the investor to either deposit more money or sell some of the assets held in the account.
Huang said although raw material prices remained on the rise, many raw material stocks here still faced selling. “The weakness resulted from fragile market confidence.”
Despite higher crude prices, Nan Ya Plastics Corp. dipped 2.96 percent to close at NT$88.60, while Formosa Chemicals & Fibre Corp. fell 1.54 percent to end at NT$83.10, and Formosa Plastics Corp. dropped 0.42 percent to close at NT$117.50.
Bucking the trend, Formosa Petrochemical Corp. ended up 0.49 percent at NT$102.00.
Elsewhere, Tung Ho Steel Enterprise Corp. shed 2.56 percent to close at NT$38.00, and China Steel Structure Corp. fell 2.98 percent to NT$58.60.
Textile brand Far Eastern New Century Corp. dropped 0.68 percent to end at NT$29.25, while Eclat Textile Co. dropped 2.28 percent to NT$558.00.
“The bright spot was that TSMC recouped all of its earlier losses,” Huang said.
“Judging from a weaker Taiwan dollar today, I suspect the buying in TSMC came from government-led funds, instead of foreign institutional investors, in a bid to prevent the Taiex from falling further.”
Shares in TSMC ended the day unchanged at NT$575.00, after hitting a low of NT$564.00. Led by TSMC — the most heavily weighted stock in the local market — the electronics index closed down 0.84 percent to end at 777.18, off a low of 770.19.
According to TWSE, foreign institutional investors sold a net total NT$16.76 billion worth of shares on the main board Tuesday.
Among other semiconductor heavyweights, fellow contract chipmaker United Microelectronics Corp. shed 4.26 percent to close at NT$58.50, and integrated circuit designer MediaTek Inc. lost 2.53 percent to end at NT$887.00.
Elsewhere in the tech sector, iPhone assembler Hon Hai Precision Industry Co. fell 2.78 percent to close at NT$105.00. Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., bucked the downturn, up 2.24 percent to end on NT$2,050.00.
Huang said the Taiex could see short-term technical support at around 16,162 points, which was an intraday low on Oct. 5, but added that investors “had better watch closely how fast crude oil prices and the benchmark 10-year U.S. treasury yield will move higher as the changes will move the global markets.”
Source: Focus Taiwan News Channel