Shares of Taiwan Semiconductor Manufacturing Co. (TSMC) came under heavy pressure, plunging by more than 3.6 percent at the end of Wednesday’s session after it was reported that Warren Buffett’s Berkshire Hathaway Inc. had cut its holdings in the chipmaker, dragging down the broader market below the 15,500-point mark, dealers said.
Market sentiment also turned cautious after the United States reported higher-than-expected inflation data for January overnight, prompting investors to worry that the Federal Reserve will push up the terminal interest rate target range to fight rising consumer prices, dealers added.
The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down by 221.59 points, or 1.42 percent, at 15,432.89 after moving between 15,388.85 and 15,553.68 after TSMC, the most heavily weighted stock in the local market, fell by 3.67 percent to close at NT$525.00. Turnover on the main board totaled NT$221.67 billion (US$7.3 billion).
The market opened down by about 1.00 percent amid a sell-off of TSMC as investors took cues from a filing by Berkshire to the U.S. Securities and Exchange Commission which showed that the investment firm cut its holdings in the Taiwanese company’s American depositary receipts (ADRs) by 86 percent from the third quarter of last year to about 8.3 million units in the fourth quarter, dealers said.
Selling of TSMC shares escalated and spread to other semiconductor stocks to put downward pressure on the main board for the rest of the session, while some investors parked their funds in select biotech and old economy stocks for hedging purposes, dealers added.
TSMC’s losses sent the electronics sector and the semiconductor sub-index down by 1.97 percent and 3.01 percent, respectively, and also contributed about 165 points to the Taiex’s fall Wednesday.
“Buffet’s decision to buy TSMC shares in the third quarter was a surprise for the market as he prefers stocks like Apple, which rolls out products for consumers instead of companies like the chipmaker which generates sales from business clients,” Concord Securities analyst Kerry Huang said.
“To me, Buffett’s reduction of TSMC holdings in the fourth quarter simply reflected his investment philosophy but did not reflect any change in the semiconductor industry which is currently undergoing inventory adjustments and is forecast to stage a rebound in the second half of this year,” Huang said. According to Berkshire’s filing, the company increased its stake in Apple in the fourth quarter.
After Wednesday’s selling, Huang said, TSMC could see some technical support ahead of its 20-day moving average of NT$520. “If the stock fails to remain above that level, it could test NT$500.00,” Huang said.
Selling also took place with other semiconductor stocks as smartphone IC designer MediaTek Inc. fell by 3.01 percent to end at NT$710.00; United Microelectronics Corp. (UMC), a smaller contract chipmaker, decreased by 0.99 percent to close at NT$49.90; and Novatek Microelectronics Corp., UMC’s display IC design unit, dipped by 0.13 percent to end at NT$398.00.
Bucking the downturn, Global Unichip Corp., TSMC’s application specific integrated circuit (ASIC) design subsidiary, rose by 1.65 percent to close at NT$926.00, and Alchip Technologies Ltd., another ASIC designer, gained 0.88 percent to end at NT$920.00.
Select tech stocks outside the semiconductor industry appeared resilient with iPhone assembler Hon Hai Precision Industry Co. rising by 0.49 percent to close at NT$102.50, and Largan Precision Co., a supplier of smartphone camera lenses to Apple, increasing by 0.67 percent to end at NT$2,240.00.
In addition, Yageo Corp., the world’s third-largest multi-layer ceramic capacitor (MLCC) supplier, rose by 0.93 percent to close at NT$545.00, and flat-panel makers AUO Corp. and Innolux Corp. increased by 0.58 percent and 1.55 percent, respectively, to end at NT$17.25 and NT$13.10.
“While the tech sector was affected by selling, investors sought targets in the biotech and old economy sectors. I think the buying came from local investors who also favored smaller stocks on the over-the-counter (OTC) market,” Huang said, referring to the resilient OTC index, which fell by only 0.49 percent Wednesday.
In the biotech industry on the main board, which rose by 0.12 percent, drug maker Lotus Pharmaceutical Co. rose by 1.87 percent to close at NT$272.50, and its counterpart Chunghwa Chemical Synthesis & Biotech Co. gained 1.07 percent to end at NT$66.40, while test kit supplier Panion & BF Biotech Inc. closed down by 1.18 percent at NT$167.50.
The cement sector also outperformed the broader market as it rose by 0.39 percent with Taiwan Cement Corp. up by 0.81 percent to end at NT$37.55 and Chia Hsin Cement Corp. up by 0.80 percent to close at NT$18.90. However, Asia Cement Corp. dipped by 0.24 percent to end at NT$42.15.
In the financial sector, which fell by 0.88 percent, Fubon Financial Holding Co. dropped by 1.00 percent to close at NT$59.50, Cathay Financial Holding Co. ended down by 1.49 percent at NT$42.95, and CTBC Financial Holding Co. fell by 1.53 percent to close at NT$22.55.
“Investors should remain alert over the Fed officials’ comments after the higher-than-expected consumer price index (CPI) growth in January amid rising fears that the Fed will raise the terminal fund rate target range by 0.25 percentage points from 5-5.25 percent to take on inflation,” Huang said.
“Under such circumstances, the U.S. dollar is likely to move higher, which will cause foreign institutional investors to move their funds out of the region. In Taiwan, tech stocks will become the victims,” Huang said.
According to the TWSE, foreign institutional investors sold a net NT$8.17 billion worth of shares on the main board Wednesday.
Source: Focus Taiwan News Channel