Shares in Taiwan moved lower Tuesday despite a rally on U.S. markets overnight as local investors shifted their attention back to the local export-oriented economy in the wake of reports that Giant Manufacturing Co., one of the leading bicycle brands in the world, has asked its suppliers for payment postponement due to weakening global demand, dealers said.
Giant's weakness led a fall in the share price of its suppliers, while the bellwether electronics sector remained concerned by worries over inventory adjustments in the global market, at a time of rising inflation and rate hikes by the major central banks around the world, dealers added.
The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 89.63 points, or 0.61 percent, at 14,522.96 after moving between 14,515.74 and 14,658.70. Turnover totaled NT$188.59 billion (US$6.14 billion).
The market opened up 5.07 points and soon rose to the day's high by rising about 46 points on a technical rebound from a session earlier, when the Taiex lost 0.63 percent, as buying emerged in the wake of a 1.58 percent increase on the Dow Jones Industrial Average overnight. However, market sentiment quickly turned sour following the reports about Giant, prompting investors to cut their holdings, which sent the main board into negative territory where it remained until the end of the session, dealers said.
"The Dow's rally reflected eased fears over an aggressive Federal Reserve," Mega International Investment Services Corp. analyst Alex Huang said. "But Taiwan has its own concerns about a fall in outbound sales on the back of falling global demand, and Giant's story simply raised those worries."
News about Giant
According to local news media reports, Giant has asked its suppliers to allow it to postpone payments for 45 days, citing a letter signed by Yen Ching-hsin (???), head of Giant's global manufacturing center, and sent to the company's suppliers.
While Giant did not disclose any details about the letter, citing non-disclosure agreements with its suppliers, the company said although the global bicycle industry has gradually seen operations return to normal in the second half of this year due to the fading effects of the COVID-19 pandemic, demand for low-priced models continues to fall, raising inventory levels and causing chaos in the supply chain.
"Giant is a large-sized company and still faces headwinds caused by falling global demand. So, other smaller exporters could suffer more," Huang said.
Shares in Giant plunged 8.04 percent to close at NT$206.00 with 6 million shares changing hands Tuesday, a sharp increase from the 1.39 million shares recorded on Monday, indicating the heavy downward pressure the stock encountered.
The knock-on effect of Giant's woes was also seen in shares of rival Merida Industry Co., which moved sharply lower by 6.35 percent to end at NT$177.00. In addition, its suppliers also moved lower with bike chain maker Kuei Meng International Inc. falling 5.73 percent to close at NT$148.00, and Cheng Shin Rubber Ind. Co., which owns the Maxxis brand of tires, shedding 1.45 percent to end at NT$34.10.
"Accessory suppliers to cycling sports also felt the pinch, indicating that the impact from Giant is spreading," Huang said. Among them, shares in footwear maker Feng Tay Enterprises Co. fell 2.16 percent to close at NT$181.50 and rival Pou Chen Corp. lost 1.52 percent to end at NT$32.40.
Tech and other sectors
Huang said the electronics sector weakened amid inventory adjustments, falling 0.73 percent with the semiconductor industry down 0.65 percent.
Among large cap semiconductor stocks, contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock, lost 0.74 percent to close at NT$471.50, smartphone IC designer MediaTek Inc. fell 0.42 percent to end at NT$709.00, while United Microelectronics Corp. (UMC), a smaller contract chipmaker, rose 0.69 percent to close at NT$43.80.
In addition, application specific integrated circuit (ASIC) designer Alchip Technologies Ltd. shed 1.59 percent to close at NT$865.00, but Powerchip Semiconductor Manufacturing Corp., another smaller contract chipmaker, added 0.62 percent to close at NT$32.40.
The steel sector outperformed the broader market, rising 1.95 percent after China's Baosteel Group raised wholesale prices for January contracts, Huang said.
In the sector, Yieh Hsin Enterprise Co. and Chung Hung Steel Corp, soared 10 percent, the maximum daily increase, to close at NT$11.25 and NT$59.20, respectively, and China Steel Corp., the largest steel maker in Taiwan, rose 0.52 percent to end at NT$29.15.
In line with the Taiex, the financial sector lost 0.76 percent with E. Sun Financial Holding Co. down 1.43 percent to close at NT$24.20, and Mega Financial Holding Co. falling 1.12 percent to end at NT$30.80. Shares in Fubon Financial Holding Co. rose 0.17 percent to close at NT$57.60.
U.S. CPI, Fed meeting
"Washington will release November consumer price (CPI) index data today, which is expected to provide more clues about the Fed's next step," Huang said. The Fed starts a two-day policymaking meeting on Tuesday U.S. time.
According to the TWSE, foreign institutional investors sold a net NT$10.25 billion worth of shares on the main board Tuesday.
Source: Focus Taiwan News Channel