Shares in Taiwan took a beating Thursday, falling by almost 400 points as investors were shocked by a plunge in the U.S. markets after Washington reported a 8.3 percent year-on-year increase in the consumer price index (CPI) for April, dealers said.
The bellwether electronics sector came under heavier downward pressure amid rising concerns over a rate hike cycle launched by the U.S. Federal Reserve after the latest inflation figure was announced on Wednesday, while sell-offs also happened with financial and old economy stocks, in particular in the transportation sector, they said.
The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 389.57 points, or 2.43 percent, at the day’s low of 15,616.68, after coming off a high of 15,934.62. Turnover totaled NT$258.37 billion (US$8.67 billion).
The market opened down by 0.39 percent with the Taiex dipping below 16,000 points, and selling escalated, especially in the afternoon session, with large-cap electronics stocks in focus as investors took cues from the heavy losses in the U.S. markets, with the Dow Jones Industrial Average falling by 1.02 percent and the tech-heavy Nasdaq index shedding 3.18 percent, dealers said.
As the selling-off of semiconductor stocks happened, the transportation sector saw a reversal of an earlier upturn as airline stocks faced headwinds, and the financial sector saw a tumble, pushing down the Taiex even lower and closer to 15,600 points at the end of the session, they said.
“Today’s selling reflected significant concerns among investors at home about the performance of the U.S. markets overnight after the latest CPI figure,” Cathay Futures Consultant analyst Tsai Ming-han said. “Worries over an aggressive Fed approach to tightening are running deeper.”
Although the 8.3-percent increase in the April CPI was lower than a rise of 8.5 percent in March, the April figure was worse than the market’s estimate of 8.1 percent and also the highest for the month in almost 40 years.
“The markets at home and abroad reflected investor fears that high inflation will prompt the Fed to become more hawkish about its monetary policy,” Tsai said. “So, the first thing many investors did was to cut their holdings for the moment to avoid further losses.”
Tsai said the electronics sector was again in the spotlight amid a sell-off as rising interest rates caused the sector’s stocks to lose their luster for investors.
The electronics sector fell by 2.12 percent with the semiconductor sub-index falling by 2.54 percent after contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock in the local market, declined by 3.07 percent to close at the day’s low of NT$505.00. TSMC’s losses contributed to a fall of about 130 points to the Taiex.
“TSMC appeared resilient yesterday as it reported a record-high in April sales. But, today, sentiment turned cautious about high inflation in Washington, which pushed down tech stocks on the U.S. markets, and the Taiwanese chipmaker was impacted by this,” Tsai said.
TSMC’s April sales rose by 0.3 percent from March and 55 percent from a year earlier to NT$172.56 billion, leaving traditional slow season effects behind.
TSMC’s selling spread to other semiconductor stocks. IC packaging and testing services provider ASE Technology Holding Co. fell by 3.33 percent to end at NT$93.00; United Microelectronics Corp., a smaller contract chipmaker, lost 1.75 percent to close at NT$47.80; and smartphone IC designer MediaTek Inc. dropped by 1.09 percent to end at NT$820.
Bucking the downturn, application-specific IC designers Global Unichip Corp. and Alchip Technologies Ltd. rose by 1.20 percent and 1.74 percent, respectively, to close at NT$505 and NT$938.
Innolux Corp., one of the leading flat-panel makers in Taiwan, also moved higher by 2.24 percent to end at NT$13.70 after the company announced on Wednesday it would cut its capital size by 9.5 percent and start a share buyback program, which dealers said helped boost its share price.
“In addition to the tech sector, old economy and financial stocks were not untouched by the weak market sentiment,” Tsai said. “Stop-loss selling served as the major driver for these stocks.”
The transportation sector lost 4.1 percent with China Airlines diving by 9.41 percent to close at NT$24.55 and EVA Airways plunging by 9.84 percent to end at NT$31.15.
In the financial sector, which fell by 3.34 percent amid fears that falling bond prices overseas would reduce insurance companies’ asset values, Cathay Financial Holding Co. and Fubon Financial Holding Co., which both own large life insurance firms, shed 4.38 percent and 3.74 percent, respectively, to close at NT$63.30 and NT$54.10.
“Amid volatility on the U.S. markets and such a downbeat mood, it is hard to predict where the Taiex will find technical support,” Tsai said. “Investors here should keep as much cash as possible for now by adjusting their portfolios.”
According to the TWSE, foreign institutional investors sold a net NT$10.32 billion worth of shares on the main board Thursday.
Source: Focus Taiwan News Channel