Shares in Taiwan extended their momentum from a session earlier to close above the 14,100-point mark Monday as buying continued amid reduced concerns over an aggressive United States Federal Reserve in the wake of moderating inflation in Washington in October, dealers said.
With tech stocks on the U.S. markets moving higher last Friday, the local bellwether electronics sector followed suit, while buying rotated to large-cap old economy stocks, lending support to the broader market during the trading session, dealers said.
The Taiex, the weighted stock in the Taiwan Stock Exchange (TWSE), ended up by 167.34 points, or 1.19 percent, at 14,174.90 after moving between 14,076.94 and 14,217.30. Turnover totaled NT$274.02 billion (US$8.69 billion).
After soaring by 3.73 percent on Friday, the local main board got a boost from follow-through buying, led by tech semiconductor heavyweights, though with the Taiex breaching 14,200 points by rising 209 points, some investors shifted to the sell side to pocket their gains from electronics sector stocks, dealers said.
Fortunately, buying rotated to old economy stocks, in particular in the cement, textile, transportation, and petrochemical industries, to help the broader market offset profit-taking in the tech sector, although the Taiex still came off an earlier high by the end of the session, dealers added.
Improved market sentiment
“Market sentiment improved a lot as investors’ appetite to take risks grew and many of them rushed to purchase more stocks today after Friday’s rally,” Mega International Investment Services Corp. analyst Alex Huang said.
“Buying in local large cap semiconductor stocks came after a rally on the U.S. markets showed fears over an aggressive Fed have faded,” he said.
The tech-heavy Nasdaq index and the Philadelphia Semiconductor Index increased by 1.88 percent and 3.08 percent, respectively, last Friday as investors appeared more willing to pick up bargains in the tech sector, which had been hit hard by the Fed’s aggressive rate cycle.
“With the U.S. consumer price index up 7.7 percent in October, slower than the 7.9 percent that the market had previously anticipated, many investors have been convinced that the Fed will slow down its pace of rate hikes,” Huang said.
“As a result, tech stocks here continued an uptrend today despite some profit-taking.”
Tech stocks
Contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock in the local market, rose by 0.79 percent to close at NT$445.00 but came off a high of NT$450.00.
The local electronics sector and the semiconductor sub-index both rose by 0.86 percent.
In the past two trading sessions, TSMC has soared by 9.20 percent. “After the rally, the stock has moved closer to its nearest stiff technical resistance ahead of NT$450.00,” Huang said. “It was not surprising that the strength was capped today.”
Among other semiconductor stocks, United Microelectronics Corp., a smaller contract chipmaker, rose by 2.05 percent to end at NT$44.90, and IC packaging and testing services provider ASE Technology Holding Co. increased by 1.44 percent to close at NT$91.70.
Buying was more apparent in IC design stocks with high-speed IC designer Asmedia Technology Inc. soaring by 10 percent, the maximum daily increase, to end at NT$713.00. Power management IC designer Silergy Corp. rose by 5.76 percent to close at NT$468.00.
Bucking the upturn, smartphone IC designer MediaTek Inc. dipped by 0.43 percent to end at NT$697.00.
Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. rose by 1.50 percent to close at NT$101.50, and Quanta Computer Inc., the world’s largest notebook computer ODM service provider, rose by 3.55 percent to end at NT$73.00.
Old economy stocks
“With foreign funds returning to the region, ample liquidity sparked rotational buying with large old economy stocks in focus,” Huang said, referring to a stronger Taiwan dollar against the U.S. dollar amid hopes about a slower pace by the Fed in raising rates.
The cement sector rose by 4.26 percent with Taiwan Cement Corp. surging by 6.22 percent to close at NT$34.15, and Asia Cement Corp. rising by 3.97 percent to end at NT$40.60, on hopes that China’s easing of COVID-19 restrictions for arrivals will benefit international demand.
A spike in international crude oil prices also due to China’s move to ease COVID-19 protocols boosted the petrochemical sector and textile sectors by 1.86 percent and 2.04 percent, respectively.
Among these sectors’ stocks, Formosa Chemicals & Fibre Corp. rose by 2.07 percent to close at NT$74.00, and Nan Ya Plastics Corp. increased by 1.93 percent to end at NT$74.00.
Textile brand Far Eastern New Century Corp. rose by 2.95 percent to close at NT$33.20, and Shinkong Synthetic Fibers Corp. ended up 3.27 percent at NT$17.35.
In the transportation sector, which rose by 2.08 percent, Evergreen Marine Corp., the largest container cargo shipper in Taiwan, rose by 3.67 percent to close at NT$155.50, and rival Yang Ming Marine Transport Corp. increased by 1.53 percent to end at NT$66.20.
Underperforming the Taiex, the financial sector rose by only 0.42 percent with Fubon Financial Holding Co. up 1.44 percent to close at NT$56.30, but Cathay Financial Holding Co. down by 0.36 percent to end at NT$41.75.
U.S. rate hikes
“While the U.S. dollar weakened sharply in recent sessions due to the October CPI figure, the Fed will still raise rates though likely at a slower pace,” Huang said. “After consolidating, I think the greenback will return to an uptrend, which is still something to watch closely.”
According to the TWSE, foreign institutional investors bought a net NT$37.78 billion worth of shares on the local main board Monday, while the U.S. dollar shed NT$0.294 to close at NT$31.116 against the Taiwan dollar.
Source: Focus Taiwan News Channel