Shares in Taiwan moved sharply lower Wednesday, closing below the 14,000 point mark with selling seen across the board amid growing concerns over the global economy, at a time when skyrocketing inflation has prompted the major central banks to raise interest rates, dealers said.
While the bellwether electronics sector continued to trend lower, led by semiconductor heavyweights, old economy stocks, in particular in the petrochemical sectors, also came under pressure throughout the session, pushing the broader market down further, they said.
The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 363.69 points, or 2.53 percent, at the day’s low of 13,985.51 after coming off a high of 14,319.32. Turnover totaled NT$246.699 billion (US$8.28 billion).
The market opened down 0.41 percent and selling escalated after 10 a.m. and large cap semiconductor stocks, especially contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), faced a sell-off as investors shrugged off the rebound on the tech-heavy Nasdaq index, which rose 1.75 percent overnight, dealers said.
Recession worries
The petrochemical sector plunged almost 9 percent, pushing the Taiex to the lowest level for the day with investors spooked after international crude oil prices fell below US$100 per barrel overnight for the first time since early May, they said.
With the major central banks in the world, particularly the U.S. Federal Reserve, becoming more aggressive in their rate hike cycles to fight inflation, there have been growing fears over the impact on the global economy and the possibility of a global recession, Mega International Investment Services Corp. analyst Alex Huang said.
“The fall in crude prices overnight provided further evidence of economic concerns, pushing the local petrochemical sector down,” Huang said. “The sector had stayed resilient compared with tech stocks as well as the broader market so its relatively high valuation simply led investors to pocket recently built gains.”
“Judging from the sell-off, market sentiment appeared very fragile, and the moderate turnover shows investors appear reluctant to buy during the dips despite heavy losses,” Huang said.
The four major entities under Formosa Plastics Group led the entire petrochemical sector down by 8.95 percent. Nan Ya Plastics Corp. lost 8.34 percent to close at NT$67.00 after going ex-dividend earlier in the day, Formosa Plastics Corp. shed 7.45 percent to end at NT$87.00, Formosa Petrochemical Corp. lost 3.22 percent to close at NT$90.30, and Formosa Chemicals & Fibre Corp. dropped 2.20 percent to end at NT$71.20.
In the textile sector, which is also crude oil price sensitive, Far Eastern New Century Corp. lost 2.17 percent to close at NT$31.55, and Shinkong Synthetic Fibers Corp. shed 2.49 percent to end at NT$17.60.
Tech sector
“The electronics sector suffered despite a rebound on the Nasdaq index overnight as investors continued to cut their holdings in large cap semiconductor stocks,” Huang said. “The semiconductor industry has seen inventories rising as demand weakens, which has raised concerns over the industry’s business outlook.”
After a fall of 1.16 percent in its American depositary receipts on the U.S. markets overnight, TSMC, the most heavily weighted stock on the local market, lost 2.35 percent to close at NT$435.50. The stock’s losses contributed about 90 points to the Taiex’s fall and led the electronics sector and semiconductor sub-index down by 2.38 percent and 2.54 percent, respectively.
“TSMC has scheduled an investor conference for July 14. Investors need to keep a close eye on it,” Huang said.
Among other semiconductor stocks, United Microelectronics Corp., a smaller contract chipmaker, shed 4.50 percent to end at the day’s low of NT$37.15, application-specific IC (ASIC) designer Alchip Technologies Ltd. fell 3.95 percent to close at NT$608.00, and smartphone IC designer MediaTek Inc. ended down 1.63 percent at NT$605.00.
Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. lost 1.95 percent to close at NT$100.50, while Largan Precision Industry Co., a supplier of smartphone camera lenses to Apple Inc., lost 2.56 percent to end at NT$1,710.00 although the company reported a day earlier that its consolidated sales for June rose 1 percent from a year earlier, ending a 16 month streak of falling sales.
Bucking the downturn, shares in flat panel maker AU Optronics Corp. rose 0.67 percent to close at NT$14.95, and rival Innolux Corp. gained 0.43 percent to end at NT$11.80 after a recent research report said TV panel prices could bottom out as suppliers scale back production to rein in the price fall.
Financials
In the financial sector, which lost 2.79 percent, Cathay Financial Holding Co. fell 3.85 percent to close at NT$44.95, Fubon Financial Holding Co. lost 3.48 percent to end at NT$58.20, and CTBC Financial Holding Co. dropped 3.29 percent to close at NT$23.50.
Since the beginning of this month, the Taiex has fallen 5.67 percent after an 11.79 percent dive in June.
“Technical speaking, the local main board showed signs of overshooting after a recent slump. I expect the Taiex to find strong technical support at around 13,500-13,600 points,” Huang said.
“However, investors should closely watch U.S. economic data such as the June non-farm payroll report due later this week and the consumer price index due next week for more clues about what the Fed will do next,” Huang added.
According to the TWSE, foreign institutional investors sold a net NT$8.43 billion worth of shares on the main board Wednesday.
Source: Focus Taiwan News Channel