Shares in Taiwan moved sharply lower to close below the 18,200 point mark Friday as the bellwether electronics sector faced further selling with investors locking in gains built earlier in the week.
Investors rushed to cut their holdings amid growing concerns over a plan by the U.S. Federal Reserve to start reducing its balance sheet, according to dealers.
This comes on the heels of the release of minutes that were more hawkish than expected from a Fed policymaking meeting held in December.
The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 198.16 points, or 1.08 percent, at 18,169.76, after moving between 18,134.41 and 18,444.12. Turnover totaled NT$326.84 billion (US$11.81 billion).
The market opened up 0.11 percent and soon rose to the day's high in the early morning session on a mild technical rebound from a session earlier, when the Taiex lost 0.71 percent.
But selling soon followed as investors dumped their tech stocks, in particular in the semiconductor industry, as worries over potential moves by the Fed to aggressively tighten its monetary policy, which made highly valuated tech stocks appear less attractive, dealers said.
Led by large-cap semiconductor stocks -- in particular contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) -- the Taiex fell below the nearest technical resistance ahead of 18,250 points, the 10-day moving average, and ended below the 18,200 points by the end of the session.
TSMC, the most heavily weighted stock in the local market, lost 1.55 percent to close at NT$634.00. TSMC's losses contributed more than 80 points to the Taiex's fall and brought decreases in the electronics sector and the semiconductor sub-index by 1.59 percent and 1.71 percent, respectively.
"Judging from the minutes, the Fed appeared more hawkish than expected by indicating in the meeting minutes that it will move to reduce its balance sheet later this year," Cathay Futures Consulting analyst Tsai Ming-han said. "And such an aggressive attitude scared away many investors who held tech stocks with relatively high valuations."
After the release of its meeting minutes Wednesday, many analysts expect the Fed will start raising its key interest rates in March.
This would mean that balance sheet reduction could start before summer by rolling off the almost US$8.3 trillion in Treasurys and mortgage-backed securities the Fed currently holds.
"I expect the market needs more time to digest the interruptions from the Fed's minutes and see more volatility, but the magnitude of losses could fade as many investors still hope for positive leads from TSMC's investor conference scheduled for Jan. 13," Tsai said.
TSMC's selling spread to other semiconductor stocks, with smartphone chip designer MediaTek Inc. down 3.08 percent to end at NT$1,100.00, integrated circuit packaging and testing services provider ASE Technology Holding Co. down 1.84 percent to close at NT$106.50, and power management IC designer Silergy Corp. down 1.13 percent to end at NT$4,380.00.
United Microelectronics Corp., a smaller contract chipmaker, appeared resilient, down only 0.16 percent to close at NT$62.60 after the company reported a record high in consolidated sales for the third consecutive month in December.
Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. lost 0.47 percent to end at NT$106.50, and Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., shed 3.87 percent to close at NT$2,485.00.
Contract notebook computer maker Compal Electronics Inc. rose 0.41 percent to end at NT$24.75.
"The tech sector was not only one feeling the pinch from the worries over the Fed's tightening. Fragile market sentiment also prompted investors to cut old economy stock holdings today," Tsai said.
The transportation sector, where many large-cap shipping stocks are traded, lost 1.31 percent.
Evergreen Marine Corp., the largest container shipper in Taiwan, lost 1.75 percent to close at NT$140.50, while rivals Yang Ming Marine Transport Corp. and Wan Hai Lines Ltd. fell 0.87 percent and 1.83 percent, respectively, to end at NT$113.50 and NT$187.50.
Elsewhere, food brand Uni-President Enterprises Corp. lost 0.58 percent to close at NT$68.00, and Eclat Textile Co. fell 1.40 percent to end at NT$635.00, while Nan Ya Plastics Corp. rose 0.46 percent to close at NT$86.50.
The financial sector bucked the downturn seen on the broader market, ending up 0.52 percent, with dealers citing hopes that higher interest rates will boost banks' profitability for the uptick.
In Friday's trading, E. Sun Financial Holding Co. rose 1.40 percent to close at NT$28.95, and Yaunta Financial Holding Co. gained 1.38 percent to end at NT$25.75, while Fubon Financial Holding Co. fell 0.26 percent to close at NT$75.70.
"Investors should keep a close eye on the U.S. job data due later in the day, which could move the U.S. markets and in turn the global markets," Tsai said.
According to the TWSE, foreign institutional investors sold a net NT$13.23 billion worth of shares on the main board Friday.
Source: Focus Taiwan News Channel