Taiwan shares plunge as tech sector comes under heavy pressure

Taipei,  Shares in Taiwan took a beating Tuesday, closing almost 300 points lower, as investors rushed to cut their holdings, in particular in the bellwether electronics sector, to lock in earlier gains, dealers said.

Contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) was a focus of the selling amid increasing concerns over an increase in domestic COVID-19 cases related to a cluster of infections at a hospital in Taoyuan, northern Taiwan, they said.

The weighted index on the Taiwan Stock Exchange (TWSE), or the Taiex, ended down 287.69 points, or 1.80 percent, at 15,658.85, after moving between 15,589.21 and 16,023.87, on turnover of NT$352.62 billion (US$12.58 billion).

The market opened up 8.62 points and rose to the day’s high in the early morning session on a mild technical rebound from a session earlier, when the Taiex fell 0.45 percent, at a time of mixed U.S. markets, with the Dow Jones Industrial Average losing 0.12 percent and the tech-heavy Nasdaq index rising 0.69 percent overnight, dealers said.

However, after the Taiex breached the 16,000 point mark, selling emerged with TSMC and other semiconductor stocks in focus as fears increase over COVID-19 infections in Taiwan and the downward pressure continued until the end of the session, dealers added.

It was the first time this year the Taiex has ended below the 10-day moving average of 15,816 points.

“Fears over the spread of the disease were raised after the Central Epidemic Command Center (CECC) announced its commander Chen Shih-chung (陳時中) would speak at a news conference after the market closes,” Mega International Investment Services Corp. analyst Alex Huang said.

“Judging from past experience, whenever Chen speaks at a news conference, he usually gives negative news,” Huang said. “At this moment, the market had grave concerns the CECC will add more domestic COVID-19 cases to its tally.”

However, after the market closed, the CECC announced that Taiwan reported no new domestic case Tuesday but added one imported case from Mexico.

Huang said the local electronics sector was hit hard for most of Tuesday’s session.

“TSMC was the top target of the selling as the stock has gained sharply since the beginning of this year. Many investors simply seized on the COVID-19 concerns as a reason to pocket their earlier gains, while the chipmaker’s fundamentals remained sound,” Huang said.

TSMC, the most heavily weighted stock on the local market, fell 2.53 percent to close at NT$617.00. Led by TSMC, the electronics sector and the semiconductor sub-index lost 2.15 percent and 2.72 percent, respectively.

Huang said TSMC shares could see the nearest technical support at around the 20-day moving average of NT$600.00 if the stock encounters more downward pressure.

TSMC’s selling was also reflected among other semiconductor stocks, with integrated circuit designer MediaTek Inc. down 4.29 percent to end at NT$871.00.

United Microelectronics Corp., a smaller contract chipmaker, dropped 4.20 percent to close at NT$54.80, and dynamic random access memory chipmaker Nan Ya Technology Corp. fell 2.47 percent to end at NT$83.00.

Old economy and financial stocks also faced heavy selling throughout the session, Huang said.

Among old economy stocks, Formosa Plastics Corp. fell 1.41 percent to close at NT$91.10, and Formosa Petrochemical Corp. shed 2.29 percent to end at NT$93.70, while food brand Uni-President Enterprises Corp. rose 0.45 percent to close at NT$67.00.

In the financial sector, Cathay Financial Holding Co. lost 1.22 percent to close at NT$40.50, and Fubon Financial Holding Co. dropped 1.90 percent to end at NT$46.50.

“While the main board as a whole fell sharply, select stocks in the electric car sector remained resilient and Hon Hai Precision Industry Co. was one of them,” Huang said.

Shares in iPhone assembler Hon Hai, which has moved into electric car production to diversify its product portfolio, fell only 0.81 percent to end at NT$12.00.

Car component makers Hota Industrial Manufacturing Co. rose 1.28 percent to close at NT$119.00, and Mobiletron Electronics Co. added 1.64 percent to end at NT$62.00.

“In addition to COVID-19 concerns, local investors are also worried foreign institutional investors could dump more local shares after massive selling in the previous two sessions,” Huang said.

“The Taiex could see more pressure, but strong technical support is expected at around 15,300 points,” he added.

According to the TWSE, foreign institutional investors sold a net NT$28.87 billion worth of shares on the main board Tuesday.

 

Source: Focus Taiwan News Channel

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