Shares in Taiwan took a beating Wednesday, closing down by 380 points overall and erasing all of the gains from a session earlier, as investors locked in the previous session’s profits from the bellwether electronics sector, dealers said.
Market sentiment remained cautious about a rate hike cycle launched by the U.S. Federal Reserve to fight inflation so selling also spread to old economy stocks, in particular in the transportation sector, where several major shipping stocks are traded, pushing the main board even lower, dealers added.
The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down by 380.89 points, or 2.42 percent, at 15,347.75, after moving between 15,346.95 and 15,687.46. Turnover totaled NT$278.53 billion (US$9.34 billion). The sell-off wiped out the main board’s Tuesday gain of 361.06 points, or 2.35 percent.
The market opened down by 0.26 percent as investors shrugged off a rebound on the U.S. markets, as the Dow Jones Industrial Average rose by 2.15 percent and the tech-heavy Nasdaq index increased by 2.51 percent overnight in a comeback from the worst weekly losses in two years, dealers said.
Hawkish U.S. Fed
Selling on the local main board escalated to plunge the Taiex below 15,400 points by the end of the session, with large semiconductor stocks and container cargo shippers in focus, as investors scrambled to pocket their profits from the previous daily session amid lingering fears over an aggressive Fed, they said.
“Despite a rally on Tuesday, the local main board remained technically unstable after a recent slump as market sentiment remained haunted by concerns over a rate hike by the Fed, which is expected to continue to drain funds out of the region for U.S. dollar-denominated assets,” MasterLink Securities analyst Tom Tang said. “There are growing concerns that an aggressive rate hike cycle will hurt the economy.”
Before Tuesday’s rebound, the Taiex had tumbled by about 1,300 points or 7.82 percent in the previous eight trading sessions, making the main board technically fragile, dealers said.
“In addition, investors witnessed Dow futures dipping again now, pointing to an ugly opening of the spot market later today, so they simply shifted to the sell side to take money and run, avoiding possible losses tomorrow,” Tang said.
Tech stocks
Tang said the tech sector was a focus of Wednesday’s selling amid fears that they would further lose their luster as their dividend yields are shy of rising bond yields after contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock in the country, plunged by 2.08 percent to close at the day’s low of NT$494.50.
TSMC’s losses strongly contributed to the electronics sector and semiconductor sub-index falling by 2.80 percent and 3.16 percent, respectively, while the stock’s market capitalization fell by NT$272.2 billion to NT$12.82 trillion.
“As further volatility around the world’s equity markets is possible, it is hard to predict when TSMC and other tech heavyweights will see their nearest technical support,” Tang said.
Among other semiconductor stocks, United Microelectronics Corp., a smaller contract chipmaker, fell by 4.75 percent to end at the day’s low of NT$44.10, while smartphone IC designer MediaTek Inc. plunged by 7.03 percent to close at NT$807.00 as demand for smartphones has showed signs of weakening.
In addition, IC packaging and testing services provider ASE Technology Holding Co. dropped by 3.02 percent to end at NT$96.40, and display driver IC designer Novatek Microelectronics Corp. fell by 7.23 percent to close at NT$321.00, while power management IC designer Silergy Corp. rose by 1.04 percent to end at NT$2,435.00 after the company announced it would start a four-for-one stock split on July 13.
Also in the tech sector, iPhone assembler Hon Hai Precision Industry Co. fell by 2.23 percent to close at NT$109.50, and multi-layer ceramic capacitor (MLCC) supplier Yageo Corp. dropped by 4.96 percent to end at NT$335.50.
Shipping, financials
“Shipping stocks also served as another driver for today’s downturn as many investors appeared reluctant to hold them despite their large cash dividend payouts,” Tang said. “Their recent heavy drops in share prices scared away many investors.”
In the transportation sector, which fell by 5.08 percent, Evergreen Marine Corp., the largest container cargo shipper in Taiwan, plunged by 7.27 percent to close at NT$102.00 after a brokerage lowered its target price on the stock, citing worries over a slowdown in the second half of this year. Its rivals Yang Ming Marine Transport Corp. and Wan Hai Lines Ltd. also fell by 7.76 percent and 2.83 percent, respectively, to end at NT$101.00 and NT$120.00.
In the financial sector, which decreased by 1.36 percent, Fubon Financial Holding Co. fell by 2.37 percent to close at NT$61.70, and Cathay Financial Holding Co. dropped by 2.21 percent to end at NT$53.00.
Outperformers
Solar energy developers and related companies bucked the downturn on hopes that the government will come up with further measures for renewable power development, dealers said. Among them, solar energy module developer United Renewable Energy Co. rose by 2.38 percent to close at NT$21.50, and Danen Technology Corp., a supplier of silicon ingots used in solar energy equipment, increased by 2.61 percent to end at NT$13.75.
“Fed Chair Jerome Powell is scheduled to testify in the U.S. Congress Wednesday and Thursday. I suggest investors pay close attention to what he will say, which could move the U.S. markets and other markets in the world,” Tang said.
According to the TWSE, foreign institutional investors sold a net NT$22.44 billion worth of shares on the main board Wednesday.
Source: Focus Taiwan News Channel