Shares in Taiwan moved lower Friday with selling sparked by losses incurred on U.S. markets overnight amid renewed concerns over an aggressive Federal Reserve and its current rate hike cycle, in the wake of the latest higher-than-expected inflation data, dealers said.
The bellwether electronics sector led the downturn as many investors fear foreign institutional investors will continue to cut their tech holdings as interest rates rise, dealers added.
In contrast, the financial sector bucked the downturn, lending some support to the broader market throughout the session, due to a decision by the Financial Supervisory Commission (FSC) to allow financial holding companies to use their capital surpluses to issue cash dividends, they said.
The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 70.80 points, or 0.46 percent, at 15,479.70, after moving between 15,418.43 and 15,503.75. Turnover totaled NT$210.095 billion (US$6.91 billion).
The market opened down 0.30 percent in a knee-jerk reaction to losses on U.S. markets, where the Dow Jones Industrial Average lost 1.26 percent and the tech-heavy Nasdaq index shed 1.78 percent on Thursday, when Washington reported that the producer price index (PPI), an inflation indicator tracking wholesale prices, rose 0.7 percent in January, beating an earlier market forecast of a 0.4 percent increase, and weakness continued, dealers said.
In addition to the PPI data, a push from St. Louis Federal Reserve President James Bullard and Cleveland Fed President Loretta Mester for an additional 50 basis point rate hike at the Fed’s next policymaking meeting in March, struck a nerve for many investors at home and abroad, dealers added.
The electronics sector lost 0.93 percent with the semiconductor sub-index falling 1.41 percent, driving the local main board lower throughout the session.
“Before the PPI data, the consumer price index reported last week was also higher than the market had expected, indicating inflation remains a worry to the market,” Cathay Futures Consultant analyst Tsai Ming-han said. “Local investors dumped their holdings in large electronic stocks which have looked less attractive with interest rates on the rise as their counterparts punished stocks on the Nasdaq index.”
With the semiconductor industry under more pressure, Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock on the local market, shed 1.89 percent to close at NT$518.00, below the 20-day moving average at around NT$520.00. TSMC’s losses contributed more than 80 points to the Taiex’s decline Friday.
“I think rate hike fears will continue to affect tech stocks,” Tsai said. “TSMC could see more losses amid U.S. volatility, but the stock will see strong technical support at around NT$500.00.”
As selling concentrated on TSMC, smaller contract chipmakers appeared resilient with United Microelectronics Corp. down 0.20 percent to end at NT$50.00 and Powerchip Semiconductor Manufacturing Corp. down 0.60 percent to close at NT$33.30.
Among other semiconductor stocks, application specific integrated circuit (ASIC) designer Alchip Technologies Ltd. lost 3.33 percent to end at NT$929.00, and IC packaging and testing service provider ASE Technology Holding Co. fell 1.92 percent to close at NT$102.00, while smartphone IC designer MediaTek Inc. ended up 1.69 percent at NT$723.00.
Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. closed unchanged at NT$103.50, while power management solution provider Delta Electronics Inc. dropped 1.51 percent to end at NT$294.50. Outperforming the Taiex, flat panel maker Innolux Corp. gained 3.68 percent to close at NT$18.20 after foreign brokerages raised their target prices on the stock, and rival AUO Corp. benefited from hopes of higher TV screen prices, rising 1.39 percent to end at NT$18.20.
“While the electronics sector moved in the weakness, investors remained willing to buy stocks outside the sector. Today, the financial sector was lifted by rotational buying due to the FSC’s new rules on cash dividend payouts,” Tsai said.
The financial sector rose 0.72 percent with Cathay Financial Holding Co. growing 2.21 percent to close at NT$44.00 and Fubon Financial Holding Co. rising 1.52 percent to end at NT$60.30. Dealers said the two companies are sitting on large piles of cash and expect more cash dividends.
In addition, shares in E. Sun Financial Holding Co. rose 1.20 percent to close at NT$25.40, and China Development Financial Holding Co. gained 1.15 percent to end at NT$13.20.
Tsai said the tourism industry received a boost, rising 2.94 percent, following a government decision to reopen the country to Hong Kong and Macau individual tourists from Feb. 20.
In the sector, FDC International Hotels Corp. and My Humble House soared 10 percent, the maximum daily increase, to close at 93.50 and 37.65, respectively. Leofoo Development Co., another hotel chain operator, rose 9.65 percent to end at NT$18.75., and Formosa International Hotels Corp. gained 5.01 percent to close at NT$283.00. A recovery in consumer spending pushed up shares in Wowprime Corp., a restaurant chain owner, by 7.48 percent to end at NT$251.50.
In other old economy industries, Taiwan Cement Corp. gained 1.33 percent to close at NT$38.00, and Asia Cement Corp. rose 0.71 percent to end at NT$42.85. Formosa Plastics Corp. added 0.45 percent to close at NT$90.10, and Nan Ya Plastics Corp. gained 0.40 percent to end at NT$75.70.
“Judging by today’s movements, I am not downbeat about the Taiex outlook as buying still rotated outside the tech sector,” Tsai said. “In addition, smaller stocks on the over-the-counter (OTC) market remained active, indicating retail investors appear willing to trade.” The OTC index rose 0.24 percent to close at 202.60 Friday.
“I expect the local main board to see strong technical support at around 15,000 points so the room for further losses will be limited,” Tsai said.
According to the TWSE, foreign institutional investors sold a net NT$11.69 billion worth of shares on the main board Friday.
Source: Focus Taiwan News Channel