Shares in Taiwan moved higher Wednesday as buying rotated to the financial sector, in particular in the late trading session, on the back of the sector's relatively low valuation, dealers said.
The rally among financial heavyweights helped the broader market offset losses seen among select tech heavyweights amid concerns over an increase in U.S. interest rates, while old economy stocks largely remained in the doldrums throughout the session, they said.
The Taiex, the weighted stock on the Taiwan Stock Exchange (TWSE), ended up 70.91 points, or 0.40 percent, at the day's high of 17,764.04, off a low of 17,669.58. Turnover totaled NT$394.85 billion (US$14.20 billion).
The market opened up 0.07 and buying continued, led by the bellwether electronics sector in the wake of a rally on U.S. markets, where the tech-heavy Nasdaq index rose 0.76 percent overnight, dealers said.
However, large electronic stocks then gradually lost their luster sending the Taiex into negative territory at one point, before the financial sector picked up and last ditch buying boosted the sector further, helping the broader market end above the previous closing level, they said.
The financial sector closed up 2.04 percent, while the electronics sector gained 0.32 percent with the semiconductor sub-index up 0.28 percent.
"Many financial stocks had lagged behind their tech counterparts and the broader market for some time," Cathay Futures Consulting analyst Tsai Ming-han said. "In a market currently awash in liquidity, rotational buying remained active. Today, bargain hunters rushed to buy into financial stocks."
Among the gaining financial stocks, which ended at their day's highs, Cathay Financial Holding Co. surged 3.67 percent to close at NT$62.20, and Fubon Financial Holding Co. rose 2.84 percent to end at NT$76.10. The two are among the most profitable financial firms in Taiwan.
In addition to an improving bottom line, "expectations of a rate hike cycle to be kicked off on the U.S. market gave these financial stocks an additional boost," Tsai said.
In addition, China Development Financial Holding Co. soared 8.31 percent to end at NT$16.95, and CTBC Financial Holding Co. gained 1.66 percent to close at NT$24.45, while Shanghai Commercial and Savings Bank bucked the upturn, falling 0.65 percent to end at NT$45.60.
"Higher interest rates cut both ways, however," Tsai said. "For tech stocks, rising interest rates will make them look less attractive. So, it was no surprise the sector failed to sustain its earlier strength."
After coming off the day's high of NT$615.00, contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock on the local market, closed unchanged at NT$610.00.
In addition, United Microelectronics Corp., a smaller contract chipmaker in Taiwan, rose 0.95 percent to close at NT$63.60, off a high of NT$64.10, while integrated circuit designer MediaTek Inc. lost 0.48 percent to end at NT$1,030.00 after hitting a high of NT$1,075.00.
Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. dropped 0.93 percent to close at NT$107.00, and shares in Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., fell 0.24 percent to end at NT$2,095.00.
In the transportation sector, which lost 0.80 percent, shipping stocks came under pressure as their recent tumble led to an increase in margin calls among retail investors.
A margin call occurs when the value of an investor's margin account falls below the broker's required amount, requiring the investor to either deposit more money or sell some of the assets held in the account.
Evergreen Marine Corp., the largest container cargo shipper in Taiwan, lost 2.09 percent to close at NT$117.00, and rivals Yang Ming Marine Transport Corp. and Wan Hai Lines Ltd. lost 2.27 percent and 1.55 percent, respectively, to end at NT$107.50 and NT$158.50.
On the other hand, airline stocks continued their momentum on the back of eased border controls in several major economies with China Airlines surging 7.01 percent to close at NT$29.00, and EVA Airways rising 4.46 percent to end at NT$29.20.
"Today's rotational buying showed that many investors remain willing to trade. As long as buying rotates back to the electronics sector, the Taiex could takeoff," Tsai said.
"However, investors should keep a close eye on the movement of the U.S. dollar as a stronger greenback is expected to prompt investors to move funds out of Taiwan dollar denominated assets," Tsai added.
Source: Focus Taiwan News Channel