Taiwan shares recover from earlier losses to end slightly lower

Taipei Shares in Taiwan closed moderately lower after recovering most of their earlier losses on the back of active bargain hunters, but market sentiment remained concerned the spread of the deadly novel coronavirus (2019 nCoV) could disrupt production of Taiwanese manufacturers in China, dealers said.

Bargain hunting focused on large cap tech stocks such as contract chipmaker Taiwan Semiconductor Manufacturing Co. and iPhone assembler Hon Hai Precision Industry Co., helping the broader market recoup its earlier losses, dealers added.

Government led funds were said to pick up financial heavyweights in a bid to prevent the local main board from falling further, a move expected to comfort investors at a time of contagion, according to dealers.

The weighted index on the Taiwan Stock Exchange (TSWE) or the Taiex ended down 38.74 points, or 0.33 percent, at 11,574.07 after moving between 11,423.34 and 11,598.03, on turnover of NT$130.79 billion (US$4.35 billion).

The market opened down 0.84 percent and selling escalated to push the Taiex down by almost 190 points in the early morning session as investors worried that Taiwanese manufacturers with operations in China will see their production impacted by the spread of the virus, dealers said.

However, as the Taiex approached 11,400 points, some investors started to move to the buy side to pick up bargains, in particular in the bellwether electronics sector to bolster the broader market, as a Reuters report said local Chinese authorities have approved Hon Hai's plan to resume operations in Zhengzhou, Henan Province, after the Lunar New Year holiday (Feb. 10), dealers said.

The report also said Hon Hai, one of the largest Taiwanese investors in China, with a workforce of more than 1 million, has also entered talks with authorities to resume production in other parts of China. The Zhengzhou plant produces iPhones for Apple Inc.

"It seems that there was strong technical support around 11,400 points so some investors appeared willing to buy the dips for the moment, while worries over production disruption in China still weighed on market sentiment," equity market analyst Andy Hsu said.

Instead of directly responding to the Reuters report, Hon Hai, which fell 1.09 percent to close at NT$82.00 after hitting a low of NT$78.90 Monday, said in a statement that it is working with Chinese local governments to resume production in an orderly manner.

Hon Hai said it will follow the rules set by local governments and employee safety is its top priority.

"I am worried that Hon Hai and other Taiwanese manufacturers in China will not have enough workers in the initial stage of production resumption due to the restrictions on people's movement in many Chinese cities amid the virus scare," Hsu said. "It is possible that only 30 40 percent of their production will be utilized in the initial phase."

Among other tech stocks which recouped earlier losses, TSMC, the most heavily weighted stock on the local market, fell only 0.15 percent to close at NT$327.50, coming off an early low of NT$321.00.

TSMC said its wafer plants in Nanjing and Shanghai's Songjiang returned to full operations Monday as scheduled, with staff on non production lines back at work after the holiday. Its production lines at the two plants ran 24 hours a day during the holiday.

Also in the electronics sector, Largan Precision Co., a supplier of smartphone camera lenses to Apple, lost 0.11 percent to end at NT$4,750.00, off a low of NT$4,575.00, while flat panel maker AU Optronics Corp. rose 4.07 percent to close at NT$11.50 and rival Innolux Corp. gained 2.08 percent to end at NT$9.32 on hopes that buyers will shift orders to them from some major Chinese manufacturers with production in Wuhan.

On the back of bargain hunting, the electronics sector fell 0.37 percent to close at 509.67 after hitting a low of 500.98.

Hsu said bargain hunters also focused on the financial sector.

"The buying of financial stocks prompted me to conclude that government led funds entered the trading floor today in a bid to shore up market confidence," Hsu said.

In the financial sector, which closed down 0.16 percent, Mega Financial Holding Co. rose 0.16 percent to close at NT$32.05, and Yuanta Financial Holding Co. added 0.49 percent to end at NT$20.40, while CTCB Financial Holding Co. closed unchanged at NT$22.50, off a low of NT$22.35.

"The Taiex is expected to continue consolidation mode amid the Wuhan virus concerns, and if there is any technical rebound, the nearest ceiling could be seen at around 11,700 points," Hsu said.

According to the TWSE, foreign institutional investors sold a net NT$4.54 billion worth of shares on the main board Monday.

Source: Focus Taiwan News Channel