Shares in Taiwan fell sharply by more than 1.8 percent on Tuesday as investors were rocked by heavy losses on the Tokyo market in the wake of an unexpected decision by the Bank of Japan (BOJ), the Japanese central bank, to tighten its monetary policy, dealers said.
A sell-off was seen across the board on the local main board, led by large-cap stocks in both the electronics and non-tech sectors, pushing the weighted index down to below the nearest technical support of the 120-day moving average of 14,311 points and close even lower, dealers added.
The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 263.29 points or 1.82 percent, at 14,170.03 after moving between 14,157.99 and 14,451.91. Turnover totaled NT$263.67 billion (US$8.56 billion).
BOJ decision
The market opened down 0.16 percent and continued to move in a narrow range before the BOJ wrapped up a policymaking meeting, announcing it would widen its yield curve control (YCC) tolerance range by raising the upper limit of the tolerance band on the 10-year government bond yield to 0.5 percent from 0.25 percent, dealers said.
With the Tokyo market falling by more than 700 points at one point, investors in Taiwan rushed to cut their holdings after 11 a.m., and the selling continued into the end of the session with the Taiex tumbling to its lowest level since Nov. 11, when the main board closed at 14,007.56, dealers added.
"The BOJ's reversal of its long-term loose monetary policy was completely unexpected. A surprise like this was the last thing the market wanted to see," Mega International Investment Services Corp. analyst Alex Huang said. After the decision was disclosed, the Japanese yen soared to a four-month high against the U.S. dollar at one point.
"A stronger yen means investors will have to adjust their investment portfolios by directing funds to yen-denominated assets, which is expected to create volatility in the global financial markets, that is likely to last for some time in the market," Huang said.
In Taiwan, Huang said, the local equity market followed a big swing in Tokyo and other regional markets including Hong Kong and Shanghai. "Large-cap stocks across the board led the downturn after 11 a.m. and none of the major sectors escaped the sell-off with the bellwether electronics sector in focus," Huang said.
Tech stocks
The electronics sector lost 2.13 percent with the semiconductor sub-index falling 2.15 percent after contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock in the local market, fell 1.93 percent to close at NT$457.50. TSMC's drop contributed almost 90 points to the Taiex's decline Tuesday.
Among other semiconductor stocks, United Microelectronics Corp., a smaller contract chipmaker, fell 2.56 percent to end at NT$41.85; IC packaging and testing services provider ASE Technology Holding Co. decreased 2.40 percent to close at NT$93.50; and smartphone IC designer MediaTek Inc. dropped 1.52 percent to end at NT$646.00.
In addition, application specific integrated circuit (ASIC) designer Alchip Technologies Ltd. plunged 7.01 percent to close at NT$823.00, and power management IC designer Silergy Corp. dropped 3.82 percent to end at NT$453.50.
Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. fell 1.48 percent to close at NT$100.00, and flat-panel makers AU Optronics Corp. and Innolux Corp. fell 1.00 percent and 2.68 percent, respectively, to end at NT$14.80 and NT$10.90.
Stocks in other sectors
The textile sector shed 2.03 percent with Eclat Textile Co. dropping 4.49 percent to close at NT$446.50, and rival Makalot Industrial Co. falling 3.95 percent to end at NT$231.00.
The petrochemical sector also dropped 1.54 percent after Formosa Chemicals & Fibre Corp. closed 1.70 percent lower at NT$69.20, and Formosa Plastics Corp. ended down 1.16 percent at NT$85.30.
Reversing a 1.50-percent increase from a session earlier, the biotech industry fell 4.26 percent with drug brand Chunghwa Chemical Synthesis & Biotech Co falling 7.46 percent to close at NT$28.55, and test kit supplier Panion & BF Biotech Inc. dropping 6.24 percent to end at NT$170.00.
Bucking the downturn, surgical mask maker Universal Inc. rose 6.20 percent to close at NT$28.25.
In the financial sector, which fell by 0.80 percent, Fubon Financial Holding Co. decreased 0.71 percent to end at NT$56.20, while Cathay Financial Holding Co. closed unchanged at NT$40.15.
"With the Taiex falling below the 120-day moving average today, the local main board has turned fragile technically and more losses could follow with the next technical support expected at around 13,850 points, the 60-day moving average," Huang said. "Investors had better seize on any technical rebound to trim holdings and keep more cash on hand during the current downtrend."
According to the TWSE, foreign institutional investors sold a net NT$10.66 billion worth of shares on the main board Tuesday.
Source: Focus Taiwan News Channel