Shares in Taiwan took a beating, falling more than 300 points Wednesday following a plunge on U.S. markets overnight caused by a spike in the benchmark 10-year U.S. treasury yield, dealers said.
The bellwether electronics sector led the downturn with large cap stocks including contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) in focus, while selling spread to old economy and financial stocks, pushing the broader market further down, they said.
The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 325.98 points, or 1.90 percent, at 16,855.46, after moving between 16,801.78 and 17,127.86. Turnover totaled NT$323.42 billion (US$11.55 billion).
The market opened down 0.31 percent and selling soon escalated as investors took their cue from a 1.63 percent fall on the Dow Jones Industrial Average and a 2.83 percent decline on the tech-heavy Nasdaq index Tuesday after the 10-year treasury yield hit its highest level since June, dealers said.
Tech heavyweights on the main board came under pressure throughout the session, pushing the electronics sector down by 2.49 percent at the end of the session with the sub-index for the semiconductor industry down 2.86 percent.
“The spike in the U.S. treasury yield made tech stocks appear overvalued and look less attractive, and that’s why these stocks at home and on the U.S. markets got hit,” Mega International Investment Services Corp. analyst Alex Huang said.
Leading the downturn, TSMC, the most heavily weighted stock on the local market, shed 2.36 percent to end at NT$580.00, but came off a low of NT$577.00.
“Today, TSMC fell victim to the U.S. volatility, contributing more than 100 percent in losses to the Taiex due to its large weighting,” Huang said. “After the plunge, the stock could see more losses before strong technical support emerges at around NT$567.00.”
Selling was also seen among other semiconductor stocks, with United Microelectronics Corp., the second largest contract chipmaker in Taiwan after TSMC, down 3.52 percent to end at NT$63.00, integrated circuit designer MediaTek Inc. down 4.60 percent to close at NT$913.00, and IC packaging and services provider ASE Technology Holding Co. falling 5.78 percent to end at NT$106.00.
Huang said market sentiment toward the semiconductor industry was also hurt after New Street Research downgraded U.S.-based semiconductor-equipment provider Applied Materials to “neutral” from “buy” on valuation concerns.
Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. lost 1.41 percent to close at NT$105.00, and power management solution provider Delta Electronics Inc. dropped 1.58 percent to end at NT$248.50.
“That the plunge on U.S. markets took a toll on Taiwanese old economy stocks as well was no surprise as the U.S. and Taiwan markets have been highly correlated,” Huang said.
The paper sector fell 4.13 percent as investors pocketed gains built in recent sessions. Cheng Loong Corp. lost 4.03 percent to close at NT$35.70, and YFY Inc. dropped 6.06 percent to end at NT$34.10.
Elsewhere in the old economy sector, Nan Ya Plastics Corp. fell 2.16 percent to close at NT$90.80, and Formosa Chemicals & Fibre Corp. lost 1.07 percent to end at NT$85.30, while Formosa Petrochemical Corp. bucked the downturn, rising 2.31 percent to close at NT$102.00.
In the financial sector, which lost 0.80 percent, Fubon Financial Holding Co. dropped 1.03 percent to end at NT$76.70, Cathay Financial Holding Co. lost 1.69 percent to close at NT$58.00, but SinPac Financial Holding Co. outperformed its peers, to rise 0.36 percent and end at NT$13.90.
“The growing bond yield in the U.S. reflects worries over the debt ceiling standstill on Capitol Hill, which has boosted fears over a possible default on the government’s interest rate payments,” Huang said. “So, local investors should pay close attention to when the debt ceiling problems will be resolved.”
After the Taiex fell below the 120-day moving average of 17,180 points and closed below the 17,000 point mark Wednesday, the index expects to see the next technical support at around 16,700 points, Huang said.
According to the TWSE, foreign institutional investors sold a net NT$35.45 billion worth of shares on the main board Wednesday.
Source: Focus Taiwan News Channel