Shares in Taiwan fell sharply by more than 380 points to close below the 14,000-point mark as investors took cues from a plunge on the United States markets overnight, dealers said.
Large-cap semiconductor stocks continued to be the focus of selling-off by bearish investors who fear rising interest rates will continue to take a toll on the global tech sector, dealers said.
Selling also spread to old economy stocks, in particular in the transportation and petrochemical sectors, to add to downward pressure on the broader market, they added.
The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down by 389.91 points, or 2.72 percent, at 13,950.62 after moving between 13,928.66 and 14,235.63. Turnover totaled NT$199.67 billion (US$6.68 billion).
The market opened down by 0.79 percent on follow-through selling from a session earlier, when the Taiex dipped by 0.86 percent, and selling escalated, especially with semiconductor heavyweights, which reflected a 2.26-percent fall on the tech-heavy Nasdaq index and a 2.46-percent decline on the Philadelphia Semiconductor Index in the U.S. overnight, dealers said.
Due to heavy selling-off, the local electronics sector fell by 2.66 percent with the semiconductor sub-index down by 3.26 percent.
Contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock in the local market, dropped by 2.71 percent to close at the day’s low of NT$449.50 after a fall of 2.94 percent in its American depositary receipts on the U.S. markets overnight.
Taiwan dollar weakness
“Look at the continued weakness of the Taiwan dollar. I suspect foreign investors continued to move their funds out of the country on expectations that the U.S. Federal Reserve will act aggressively in tightening to tackle inflation,” said More Rich Securities Investment Consulting analyst Adam Lin.
Lin was referring to the local currency, which moved closer to the NT$30 mark against the greenback Tuesday morning.
“Many investors at home and abroad are jittery ahead of the release of the U.S. June consumer price index (CPI) on Wednesday,” Lin said, adding that there are fears that the CPI growth for June will exceed May’s increase of 8.6 percent, prompting the Fed to act in a more hawkish manner.
Along with concerns over capital flight, investors also saw the losses among tech stocks on the U.S. markets overnight as a reason to further cut their holdings in local semiconductor stocks with TSMC in focus, Lin said.
Tech stocks tumble
“TSMC is scheduled to hold an investor conference Thursday which anxious investors have been waiting for to get the company’s guidance for the third quarter and the entire 2022, as market sentiment has been dampened by concerns that global demand for tech gadgets has weakened due to skyrocketing inflation and rate increases,” Lin said.
Caution toward the semiconductor industry also pushed down other IC giants in Taiwan. Among them, United Microelectronics Corp. (UMC), a smaller contract chipmaker, fell by 4.79 percent to end at NT$36.75.
Smartphone IC designer MediaTek Inc. fell by 3.61 percent to close at NT$614.00, and application-specific IC (ASIC) designer Alchip Technologies Ltd. plunged by 6.73 percent to end at NT$568.00.
Also in the tech sector, iPhone assembler Hon Hai Precision Industry Co. remained resilient, falling by only 0.50 percent to close at NT$100.50 on hopes about its efforts in developing electric vehicles to boost its profit margin.
In addition, multi-layer ceramic capacitor (MLCC) supplier Yageo Corp. bucked the downturn, rising by 1.64 percent to end at NT$309.00 after announcing a day earlier it would launch a shareback program.
Under the program, the company will repurchase up to 11 million shares at a price range of between NT$304 and NT$531 from July 12-Sept. 11.
Interest rake hikes, inflation
“Non-tech stocks also came under pressure today, with shipping stocks being affected by market speculation about a fall in freight rates as rising interest rates and growing inflation have hurt the economy as well as demand for cargo shipping services,” Lin said.
In the transportation sector, which fell by 5.63 percent, Evergreen Marine Corp., the largest container cargo shipper in Taiwan, fell by 6.72 percent to close at NT$86.10; and rivals Yang Ming Marine Transport Corp. and Wan Hai Lines Ltd. plunged by 6.92 percent and 7.05 percent, respectively, to end at NT$82.10 and NT$112.00.
Bulk cargo shipping firms also saw a sell-off with Sincere Navigation Corp. falling by 6.84 percent to close at NT$19.75, and U-Ming Marine Transport Corp. dropping by 5.57 percent to end at NT$38.15.
Petrochemical stocks were largely battered by the falling international crude oil price after the U.S. government released additional strategic reserves to rein in inflation.
Among them, Formosa Chemicals & Fibre Corp. plunged by 7.05 percent to close at NT$64.60, Formosa Petrochemical Corp. fell by 5.59 percent to end at NT$ 82.80, and Nan Ya Plastics Corp. dropped by 4.70 percent to close at NT$60.60. However, Formosa Plastics Corp. ended up by 0.59 percent at NT$85.40.
In the financial sector, which fell by 2.80 percent, Fubon Financial Holding Co. dropped by 4.12 percent to close at NT$55.80, CTBC Financial Holding Co. fell by 2.96 percent to end at NT$22.95, and Cathay Financial Holding Co. decreased by 2.77 percent to close at NT$43.80.
“Today’s sell-off pushed the Taiex below the technical support of 13,951 points, the intraday low of July 7, so technically speaking the local main board has turned fragile,” Lin said.
“Unfortunately, volatility on the U.S. markets could continue and the Taiex is likely to test the next technical support of around 13,000 points in the short term,” he said.
According to the TWSE, foreign institutional investors sold a net NT$9.68 billion worth of shares on the main board Tuesday.
Source: Focus Taiwan News Channel