Shares in Taiwan closed slightly higher Tuesday on a limited technical rebound from a slump in the previous daily session as an earlier upturn was eroded amid lingering concerns over a hawkish U.S. Federal Reserve and its monetary policy tightening, dealers said.
The financial sector served as an anchor to stabilize the broader market, as the bellwether electronics sector came off its high and moved lower as investors feared rising interest rates will prompt foreign institutional investors to dump tech stocks sitting at high valuations, they said.
The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended up 23.89 points, or 0.14 percent, at 16,644.79, after moving between 16,582.11 and 16,729.47. Turnover totaled NT$254.06 billion (US$8.68 billion). On Monday, the Taiex plunged by 2.37 percent.
The market opened up by 0.34 percent and soon rose to the day's high in the early morning session as buying was triggered by a rally on the U.S. markets, where the Dow Jones Industrial Average rose by 0.70 percent Monday, bouncing back from a 2.52-percent tumble on Friday, as the U.S. benchmark 10-year treasury yield fell, dealers said.
With the Taiex breaching 16,700 points at one point, investors started to pocket their gains from tech heavyweights, while major financial stocks continued their momentum into the end of the session, helping the local main board end slightly above the previous closing level, dealers added.
Investor caution
"Despite a rebound in the Dow, many investors still fear further volatility will come from the ongoing rate hike cycle launched by the Fed (in March)," Mega International Investment Services Corp. analyst Alex Huang said.
"The Taipei stock market was not the only one in the region that saw gains eroded today amid investor caution as funds continued to exit the region for U.S. dollar-denominated assets," Huang said, referring to the Tokyo, Hong Kong, Seoul, and Shanghai markets.
Giving up its earlier gains during the day, the electronics sector fell by 0.03 percent after a 2.43-percent plunge the previous day, with the semiconductor sub-index down by 0.43 percent.
"(Contract chipmaker) Taiwan Semiconductor Manufacturing Co. (TSMC) failed to sustain its earlier upturn as investors simply locked in their gains as rising interest rates will continue to cause heavyweights, including TSMC, to lose their luster," Huang said.
Tech stocks
TSMC, the most heavily weighted stock in the local market, edged down by 0.18 percent to close at NT$546 after coming off a high of NT$551. "But, on the back of its healthy fundamentals, I expect the stock to see strong support ahead of NT$518, an intraday low seen on May 12, 2021," Huang said.
Selling in the electronics sector focused on highly priced semiconductor stocks, Huang said. Among them, application-specific IC (ASIC) manufacturer Alchip Technologies, Ltd. fell by 2.44 percent to end at NT$801, and power management IC designer Silergy Corp. plunged by 8.41 percent to close at NT$2,560, while smartphone IC designer MediaTek Inc. appeared resilient, falling by only 0.48 percent to end at NT$833.
Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. rose by 0.50 percent to close at NT$101.00 but flat-panel maker AU Optronics Corp. fell by 3.95 percent to end at NT$17.00 as its net profit in the first quarter of this year fell by more than 50 percent from a quarter earlier.
"While the tech sector was muted, interest shifted to the financial sector today as rising interest rates are expected to boost the returns from financial firms' overseas investments," Huang said. "I do not rule out the possibility that government-led funds may have engaged in purchases of financial stocks to prevent the Taiex from falling."
Other sectors
The financial sector rose by 1.10 percent with CTBC Financial Holding Co. up by 2.06 percent to close at NT$29.70 and E. Sun Financial Holding Co. up by 3.08 percent to end at NT$33.45. In addition, Fubon Financial Holding Co. rose by 0.40 percent to close at NT$75.10, and Cathay Financial Holding Co. increased by 0.31 percent to end at NT$64.
Rotational buying also lifted select stocks in the textile sector, which rose by 1.11 percent. Among them, Far Eastern New Century Corp. rose by 0.83 percent to close at NT$30.25, and Eclat Textile Co. increased by 2.21 percent to end at NT$485.
The transportation sector underperformed the broader market as it fell by 1.44 percent, led by airline stocks. China Airlines fell by 3.75 percent to close at NT$28.20, and rival EVA Airways declined by 3.31 percent to end at NT$35.05.
"Before the Fed's next two-day policymaking meeting ends May 4, wide fluctuations on the global markets could continue so I suggest investors stay on the sidelines before the meeting outcome is finalized," Huang said.
According to the TWSE, foreign institutional investors sold a net NT$14.83 billion worth of shares on the main board Tuesday.
Source: Focus Taiwan News Channel