Shares in Taiwan trended sharply lower Tuesday, falling by more than 120 points, amid lingering concerns about the United States Federal Reserve’s ongoing tightening ahead of a two-day policymaking meeting that starts later in the day, dealers said.
Large-cap electronics stocks, in particular in the semiconductor industry, came under pressure as several tech heavyweights such as Microsoft Corp., Intel Corp., and Apple Inc. will hold their investor conferences later this week to report their earnings for the second quarter and give guidance for the third quarter, they said.
The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down by 129.55 points, or 0.87 percent, at 14,806.78, after moving between 14,750.71 and 14,912,41. Turnover totaled NT$183.34 billion (US$6.28 billion).
The market opened down by 0.16 percent in reflection of the lackluster U.S. markets overnight, and selling increased with semiconductor giants, including contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) in focus.
The weakness continued into the end of the session, pushing the Taiex below the nearest technical support of 14,865 points, the five-day moving average, dealers said.
“Fears over an aggressive Fed keep dictating the financial markets at home and abroad, and as the policymaking meeting loomed near, such caution played a bigger role in market sentiment,” Mega International Investment Services Corp. analyst Alex Huang said.
Huang said the market had widely anticipated the Fed would raise its key interest rates by 75 basis points after its July meeting to tackle skyrocketing inflation in the U.S. market, where the consumer price index reached a four-decade high of 9.1 percent in June.
“Investors also have appeared anxious to wait for the Fed’s comments on the economy and its hints on what it will do in the September meeting,” Huang said. “So, for the moment, investors are cutting their holdings to avoid further losses down the road.”
Before the July meeting, the American central bank has raised 150 basis points since March.
Huang said liquid semiconductor heavyweights again fell victim to rising interest rates as their dividend yields were dwarfed by a spike in bond yields.
In the semiconductor industry, where the sub-index fell by 1.22 percent, TSMC, the most heavily weighted stock in the local market, fell by 0.90 percent to close at NT$495.00 on follow-through selling after it fell below the NT$500.00 mark on Monday.
Smaller contract chipmakers even encountered stronger headwinds with United Microelectronics Corp. (UMC) dropping by 4.69 percent to end at NT$38.60, and Powerchip Semiconductor Manufacturing Co. falling by 3.48 percent to close at NT$38.85.
“The weakness of UMC and Powerchip resulted from a move by (smartphone IC designer) MediaTek Inc. to team up with Intel for developing mature processes, which means the IC designer is shifting its orders from the two Taiwanese contract chipmakers to Intel,” Huang said.
For its part, MediaTek, which reiterated that its business ties with TSMC remained solid as the contract chipmaker provides the IC designer with chips made on its high-end processes, also came under pressure as it fell by 1.02 percent to end at NT$681.00.
Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. bucked the downturn, rising by 0.47 percent to close at NT$108.00 on hopes that its diversified product mix will boost its bottom line.
PC brand Acer Inc. fell by 1.95 percent to end at NT$22.60 as investors pocketed their earlier gains built in recent sessions.
“With the tech sector in weakness, buying rotated to select old economy stocks. Today, some tourism stocks benefited from hopes that the government will ease border controls soon,” Huang said.
Among the hotel operators that gained, FarGlory Hotel Co. rose by 1.27 percent to close at NT$35.85, and Chateau International Development Co. increased by 3.27 percent to end at NT$34.70.
The food sector also benefited from rotational buying with Uni-President Enterprises Corp. up 0.71 percent to close at NT$70.50, and Wei Chuan Foods Corp. up 1.00 percent to end at NT$20.30.
Elsewhere, textile brand Far Eastern New Century Corp. fell by 1.09 percent to close at NT$31.75, and Eclat Textile Co. dropped by 1.46 percent to end at NT$437.50.
“The U.S. markets have entered a super week in the current earnings season. Investors just wanted to hear comments from tech heavyweights about their business outlook at a time when concerns are rising over semiconductor inventory build-ups due to falling demand,” Huang said.
After the Taiex fell below the 5-day moving average, the local main board had turned more fragile technically, and further losses are possible with the index expected to test the 10-day moving average of around 14,700 points soon, Huang said.
According to the TWSE, foreign institutional investors sold a net NT$3.24 billion worth of shares on the main board Tuesday.
Source: Focus Taiwan News Channel