Taiwan shares reverse earlier losses on TSMC gains

Shares in Taiwan reversed earlier losses and ended slightly higher Tuesday as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) staged a rebound and stabilized the broader market, dealers said.

Although the main board was concerned over a possible move by the U.S. Federal Reserve to tighten monetary policy, the financial sector soared more than 2 percent, led by large cap financial holding companies, which expect to benefit from higher returns on overseas investments in the wake of rising interest rates, they said.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended the day up 48.83 points, or 0.27 percent, at 18,288.21, after moving between 18,135.43 and 18,293.53. Turnover totaled NT$302.77 billion (US$10.93 billion).

The market opened up 0.15 percent and hit the day's high in the early morning session on follow-through buying from a session earlier, when the Taiex rose 0.38 percent.

Then selling focused mainly on tech stocks kicked off, after the benchmark 10-year treasury yield in the United States rose amid concerns over the possibility of tighter monetary policy, dealers said.

However, TSMC, the most heavily weighted stock on the main board, received a boost from late session buying, helping the broader market return to positive territory by the end of the session, they said.

"TSMC served as an anchor preventing the Taiex from ending lower today as it did yesterday," Concord Securities analyst Kerry Huang said. "The stock accounts for more than 30 percent of the Taiex's weighting and as long as it moves higher, the main board follows."

TSMC rose 1.24 percent to close at NT$651.00, after coming off a low of NT$639.00. Dealers said the buying largely resulted from optimism that the chipmaker will provide positive leads at an investor conference scheduled for Thursday.

The chipmaker, which on Monday announced it posted a new quarterly high in consolidated sales for the fourth quarter of last year, is expected to detail its October-December results and give guidance for the first quarter of this year and 2022 as a whole.

TSMC's gains contributed more than 65 points to the Taiex and boosted the electronics index by 0.08 percent, which ended at 880.98, off a low of 873.73, with the semiconductor sub-index up 0.42 percent.

"It is possible that foreign institutional investors stood on the buy side for TSMC," Huang said.

According to the TWSE, foreign institutional investors bought a net NT$2.23 billion worth of shares on the main board Tuesday.

However, many tech heavyweights moved into the doldrums as rising interest rates made them look less attractive, Huang said.

"The 10-year U.S. treasury yield hit 1.8 percent at one point overnight (after ending 2021 near 1.51 percent), indicating concerns over the Fed's rate hike cycle," Huang said. "In addition, many also fear the Fed will start to reduce its balance sheet, which could push up interest rates further."

Among the falling semiconductor stocks, smartphone chip designer MediaTek Inc. lost 1.37 percent to close at NT$1,080.00, dynamic random access memory (DRAM) chip supplier Winbond Electronics Corp. shed 2.12 percent to end at NT$30.00, and power management chip designer Silergy Corp. plunged 5.69 percent to close at NT$3,980.00.

United Microelectronics Corp., a smaller contract chipmaker, was more resilient and ended the day unchanged at NT$62.10.

Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. closed flat at NT$104.50, while Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., lost 0.20 percent to end at NT$2,470.00.

"Higher interest rates cut both ways. Financial stocks are expected to reap higher returns from their overseas investments with financial firms that have life insurance operations in focus," Huang said.

In the financial sector, which surged 2.69 percent, shares in Fubon Financial Holding Co., which owns Fubon Life Insurance Co., rose 4.58 percent to close at NT$79.90. Cathay Financial Holding Co., which has Cathay Life Insurance Co., gained 3.86 percent to end at NT$64.50.

In addition, CTBC Financial Holding Co. added 3.79 percent to close at NT$27.40, and Mega Financial Holding Co. grew 2.35 percent to end at NT$37.00.

Elsewhere, Formosa Petrochemical Corp. rose 0.61 percent to close at NT$98.40, while Formosa Plastics Corp. gained 0.47 percent to end at NT$106.00. Formosa Chemicals & Fibre Corp. added 0.37 percent to close at NT$81.20, and Nan Ya Plastics Corp. ended up 0.23 percent at NT$87.10.

The four companies posted NT$240.38 billion in combined net profit in 2021, up 230 percent from a year earlier after generating NT$1.67 trillion in consolidated sales.

"Fed Chair Jerome Powell will attend a reconfirmation hearing on Capitol Hill later in the day. Investors should pay close attention to what he says about monetary policy, as his comments could move the global financial markets," Huang said.

Source: Focus Taiwan News Channel