Taiwan shares extend heavy losses, end below 9,500 points

Taipei, Shares in Taiwan continued to plunge Tuesday, dropping more than 200 points to end below 9,500, as investors took cues from a dive of the Dow Jones Industrial Average overnight, amid growing concerns about the global economic impact of the COVID-19 coronavirus pandemic, dealers said.

Selling focused Tuesday on the bellwether electronics sector, led by contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), after the company's American depositary receipts (ADRs) fell 14 percent the previous day, dealers said.

The weighted index on the Taiwan Stock Exchange (Taiex) ended down 278.14 points, or 2.86 percent, at 9,439.63, after moving between 9,371.35 and 9,677.07, on turnover of NT$236.06 billion (US$7.82 billion).

The market opened down 1.84 percent and remained weak, with a focus on TSMC, the most heavily weighted stock on the local market, and other large cap stocks.

As the decline extended to heavyweights in the financial and old economy sectors, the Taiex plunged more than 340 points to the day's low, before recovering slightly on some bargain hunting, dealers said.

The bargain hunting was also sparked by a rebound of Dow futures, signaling a technical rebound of the spot market later in the day, dealers said, adding that government-led funds were among the bargain hunters.

The Taiex's sharp drop followed a 12.9 percent dive of the Dow overnight, the steepest decline since the Black Monday market crash in 1987, despite an interest rate cut of 1 percentage point by the U.S. Federal Reserve on Sunday.

"Market sentiment has been spooked by the Fed's surprise rate cut, which spurred fears that the COVID-19 impact may be worse than expected," Ta Chan Securities analyst Jerry Chen said.

In the second emergency rate cut in 15 days, the Feb lowered key interest rates to zero, after a 0.50 percentage point cut on March 3.

"Furthermore, U.S. President Donald Trump, who until then had appeared unworried about the coronavirus pandemic, said it might continue into August," Chen said. "He further said a recession of the U.S. economy is possible due to the virus."

TSMC, falling victim to the latest selling after its heavy ADR losses Monday, dropped 3.07 percent to close at NT$268.00, with 121.08 million shares changing hands.

"Judging from the sell-off of TSMC, it seemed that foreign institutional investors remained on the sell side today," Chen said.

According to Taiex data, foreign institutional investors sold a net NT$23.05 billion worth of shares on the main board Tuesday, after a net sell of NT$33.35 billion the previous day. So far this year, foreign institutional investors have sold a net NT$400 billion worth of shares on the Taiex.

Hon Hai Precision Industry Co., an iPhone assembler and second only to TSMC in terms of market capitalization, fell only 0.70 percent to close at NT$70.60, while Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., bucked the downturn, ending up 0.27 percent at NT$3,735.00.

"With the market awash in liquidity, investors were putting their funds into defensive stocks with high dividend yields such as telecom shares," Chen said.

Among them, Chunghwa Telecom Co. rose 1.90 percent to close at NT$107.00, and Far EasTone Telecommunications Co. gained 2.96 percent to end at NT$62.70.

Meanwhile, selling was also seen in financial stocks, as the market has been anticipating that the local central bank will also cut interest rates, which will squeeze banks' profitability.

In the financial sector, CTBC Financial Holding Co. shed 3.67 percent to end at NT$18.35, Mega Financial Holding Co. fell 3.45 percent to close at NT$28.00, Cathay Financial Holding Co. dropped 2.23 percent to end at NT$35.00, and Fubon Financial Holding Co. finished 1.84 percent lower at NT$37.35.

Due to lower crude oil prices, petrochemical stocks also dropped, with Formosa Plastics Corp. falling 4.60 percent to end at NT$74.60, and Nan Ya Plastics Corp. losing 4.76 percent to close at NT$56.00.

"If the Dow follows futures and rebounds later in the day, the Taiex may bounce back tomorrow," Chen said. "But the gains are likely to be limited as investors are wary of the economic impact of the coronavirus."

Source: Focus Taiwan News Channel