Virus fears send Taiwan shares into 500-point plunge

Taipei, Shares in Taiwan came under heavy downward pressure, falling more than 500 points to close below the 9,000-point mark Thursday as market sentiment was hurt by a plunge on Wall Street amid the global COVID-19 coronavirus pandemic, dealers said.

Selling was seen across the board, with blue chip stocks in focus, as the virus spread has raised fears over the deterioration of the global economy, dragging down demand and the local export-oriented electronics sector, while a plunge in international crude oil prices has sent petrochemical stocks down, the dealers said.

The financial sector was affected by expectations that the local central bank will follow the U.S. Federal Reserve in cutting its key interest rates in a quarterly policymaking meeting later Thursday, which is expected to squeeze the interest rate spread, the dealers said.

The weighted index on the Taiwan Stock Exchange (TWSE), or Taiex, ended down 537.33 points, or 5.83 percent, at 8,681.34, after moving between 8,523.63 and 9,085.28 on turnover of NT$269.75 billion (US$8.86 billion).

The market opened down 1.45 percent and selling increased as investors rushed to dump their blue chips in the wake of the heavy losses on the U.S. markets, where the Dow Jones Industrial Average dove 6.3 percent to 19,898.92, marking its first close below the 20,000-point mark since February 2017 amid rising concerns over the pandemic, the dealers said.

While selling focused on market heavyweights throughout the session, some bargain hunters emerged in the afternoon session to pick up battered stocks, in particular contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), which helped the Taiex recoup some of its earlier losses by the end of the session, the dealers added.

"Judging from the expanded turnover on the main board, investors simply went into panic-selling mode at a time when there have been no signs about when the virus spread will be contained," equity market analyst Andy Hsu said. Thursday's trading volume topped the previous day's NT$212.30 billion.

"Only when the global markets, in particular Wall Street, start to stabilize, will the local main board have a chance to become stable," Hsu said. "Unfortunately, I cannot see any sign of strong technical support for the Taiex for now."

The bellwether electronics sector remained highlighted by the latest sell-off, down 5.61 percent, Hsu said.

"The virus spread has prompted a group of countries to close their borders or impose similar lockdowns. Now, investors fear that such measures will hinder economic activity and hurt demand," Hsu said. "Taiwanese tech firms, which depend on exports, could suffer."

In the tech sector, TSMC, the most heavily weighted stock in the local market, fell 3.69 percent to close at NT$248.00, with 160.18 million shares changing hands, but came off an earlier low of NT$233.50.

"I think that when foreign institutional investors continue to stay on the sell side, government-led funds have continued to lend support to the Taiex by picking up stocks like TSMC to cap the losses," Hsu said.

TSMC went ex-dividend Thursday to give NT$2.5 in cash dividend per share on its earnings for the third quarter of last year, but failed to return to the previous ex-dividend level by the end of the session amid the rising COVID-19 concerns.

Ex-dividend is when a stock begins trading without the dividend value, which means that on Thursday, TSMC shares began trading at NT$2.5 less than their closing price of NT$260.00 in the previous day's session.

According to the TWSE, foreign institutional investors sold a net NT$21.22 billion-worth of shares on the local main board Thursday after a net sell of NT$28.17 billion.

Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co., second to TSMC in terms of market capitalization, fell 5.29 percent to close at NT$66.30, while Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., shed 9.72 percent to end at NT$3,250.00.

With the weakness of the global oil market, the plastics/chemical sector ended down 6.86 percent. In that sector, Nan Ya Plastics Corp. shed 9.73 percent to close at NT$47.30 and Formosa Plastics Corp. dropped 4.86 percent to end at NT$66.60.

Among the falling financial sector, which was punished by an expected rate cut by the central bank, down 6.81 percent, E. Sun Financial Holding Co. shed 10 percent, the maximum daily decline, to close at NT$20.00, Fubon Financial Holding Co. lost 5.43 percent to end at NT$34.85 and Cathay Financial Holding Co. fell 1.88 percent to close at NT$34.00.

The committee of the National Stabilization Fund was scheduled to meet at around 5 p.m. Thursday to discuss whether it will intervene. Vice Premier Chen Chi-mai (???) will preside over the meeting.

The NT$500 billion stabilization fund was set up in 2000 by the government to serve as a buffer against unexpected external factors disrupting the local bourse.

Source: Focus Taiwan News Channel