Shares in Taiwan moved sharply lower to close below the 15,000-point mark with fears rising over the aggressive policy approach of the U.S. Federal Reserve, after Fed Chair Jerome Powell on Friday indicated the determination of the American central bank to fight inflation by raising interest rates, dealers said.
Following the sharp drop on U.S. markets at the end of last week after Powell's remarks, selling in large cap stocks, in particular in the bellwether electronics sector, dragged the local main board down by more than 350 points at the end of the session, dealers added.
The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 352.25 points, or 2.31 percent, at 14,926.19, after moving between 14,843,72 and 15,197.19. Turnover totaled NT$209.39 billion (US$6.89 billion).
The market opened down 0.53 percent and the sell-off increased as local investors took their cue from the 1,000 point, or 3.03 percent, plunge on the Dow Jones Industrial Average and 3.94 dive on the tech-heave Nasdaq index on Friday, when Powell delivered a strong commitment to take on skyrocketing inflation at the annual central bank meeting, dealers said.
The weakness on the local main board continued to the end of the session as selling spread to large cap non-tech stocks, in line with the steep downturn suffered by semiconductor heavyweights, in particular contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), dealers added.
"Powell's strong determination to carry out a rate hike and rein in inflation hurt market sentiment around the region," MasterLink Securities analyst Tom Tang said. "The Taipei market was no exception after the steep U.S. losses."
According to Powell, due to the Fed's efforts to take on inflation, "these are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain." More and more analysts believe the Fed will raise its key interest rates a further 75 basis points at a policymaking meeting scheduled for September.
"TSMC and other liquid large cap semiconductor stocks simply fell victim to worries over rising interest rates which will make them less attractive," Tang said.
After a 3.23 percent decline in its American depositary receipts (ADRs) on Friday, TSMC, the most heavily weighted stock on the local market, lost 2.64 percent to close at NT$498.50. TSMC's losses led the electronics sector and the semiconductor sub-index to move lower by 2.44 percent and 2.76 percent, respectively.
As the U.S. dollar continues to appreciate against the Taiwan dollar, TSMC is expected to benefit from the weakness of the local currency and it is possible the company will rake in NT$35 in earnings per share this year," Tang said. "Based on the EPS estimate, its valuation is very attractive after it fell below the NT$500 mark."
Among other falling semiconductor stocks, United Microelectronics Corp., a smaller contract chipmaker, shed 3.27 percent to end at NT$39.95 after a 5.16 percent drop in its ADRs on Friday.
In addition, Powerchip Semiconductor Manufacturing Co., another smaller contract chipmaker, dropped 2.73 percent to close at NT$33.90, IC packaging and testing services provider ASE Technology Holding Co. lost 3.54 percent to end at NT$84.40, and smartphone IC designer MediaTek Inc. lost 3.69 percent to end at NT$653.00.
Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. lost 2.26 percent to close at NT$108.00, and shares in Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., shed 4.53 percent to end at NT$1,895.00.
Old economy and financial heavyweights also suffered pressure throughout the session with selling sparked by losses on other regional markets, including Tokyo and Seoul, Tang said.
Among old economy stocks, Formosa Plastics Corp. lost 2.04 percent to close at NT$91.30, and Nan Ya Plastics Corp. dropped 2.14 percent to end at NT$68.70.
In the financial sector, Cathay Financial Holding Co. fell 1.54 percent to close at NT$45.60, and Fubon Financial Holding Co. lost 1.54 percent to end at NT$57.60.
Some bargain hunters rushed to park their money in select non-tech stocks with the biotech sector resilient, Tang said.
Drug brand Sinphar Pharmaceutical Co. rose 1.66 percent to close at NT$33.65 and vaccine developer Adimmune Corp. gained 0.13 percent to end at NT$39.55, while test kit supplier Panion & BF Biotech Inc. fell 1.65 percent to close at NT$149.00.
BizLink Holding Inc., a supplier of interconnect solutions for automotive electronics, soared 9.15 percent to end at NT$328.00 after foreign brokerages raised their target price on the stock.
"Amid volatility on U.S. markets, further losses on the local main board are possible," Tang said. "However, I expect the Taiex will see strong technical support at around 13,928, the intraday low on July 12."
According to the TWSE, foreign institutional investors sold a net NT$24.40 billion worth of shares on the main board Monday.
Source: Focus Taiwan News Channel