Taiwan shares end flat before MSCI weighting cut takes effect

Taipei, Shares in Taiwan closed little changed Friday, with earlier gains eroded when selling emerged in the late trading session before Taiwan's weighting cut in MSCI's major indexes comes into effect following the market close, dealers said.

Market sentiment toward the future movement of the local equity market remained cautious over trade tension between Washington and Beijing ahead of the G20 summit set to start later in the day in Argentina, where U.S. President Donald Trump is expected to meet his Chinese counterpart Xi Jinping, they said.

The weighted index on the Taiwan Stock Exchange (TWSE) or the Taiex closed up 2.67 points, or 0.03 percent, at the day's low of 9,888.03, off an early high of 9,957.63, on turnover of NT$167.53 billion (US$5.44 billion).

The market opened up 0.14 percent and moved to the day's high to breach 9,900 points on the back of buying largely focused on the petrochemical and financial sectors, while the bellwether electronics sector remained in the doldrums, dealers said.

However, selling emerged in the late trading session with large cap stocks such as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), smartphone camera lens supplier Largan Precision Co. and Cathay Financial Holding Co. in focus as foreign institutional investors cut their holdings in response to the latest weighting cuts by MSCI, dealers added.

"It was no surprise that selling took hold in the late trading session before the index adjustments took effect after today's market close," Hua Nan Securities analyst Kevin Su said. "These MSCI indexes are followed closely by passive mutual funds."

Earlier this month, global index provider MSCI Inc. announced it cut Taiwan's weighting in three of its major indexes after a semi-annual index review. Among the three indexes, Taiwan's weighting on the MSCI Emerging Markets Index fell from 11.73 percent to 11.63 percent. The index is closely watched by foreign institutional investors when shaping strategies for emerging markets.

Among the stocks which felt the pinch from late session selling, TSMC, the most heavily weighted stock on the local market, fell 1.53 percent to close at the day's low of NT$225.50, off an early high of NT$231.00, with 55.87 million shares changing hands.

TSMC's losses spread to other tech stocks with shares in Largan down 4.13 percent to close at NT$3,370.00 and iPhone assembler Hon Hai Precision Industry Co. down 0.69 percent to end at NT$71.90.

"The three are the most important Taiwanese suppliers to Apple. Selling seen in the three stocks in the late trading session erased almost all the broader market's earlier gains," Su said.

In the financial sector, which also saw late session selling, Cathay Financial Holding Co. closed unchanged at NT$48.55 after hitting an early high of NT$48.95, and Mega Financial Holding Co. fell 0.58 percent to end at NT$25.60, off an early high of NT$26.15.

"Fortunately, the petrochemical sector served as an anchor to stabilize the main board today," Su said.

In the sector, shares in Formosa Chemicals & Fiber Corp. gained 1.91 percent to close at NT$106.50, and Formosa Plastics Corp. added 0.50 percent to end at NT$100.00 after crude oil prices bounced back Thursday.

"The local main board remained in consolidation mode as many investors remain bothered by the Washington-Beijing trade disputes," Su said. "The global markets are watching closely whether Trump and Xi will move a step ahead to resolve the dispute at the G20 meeting."

According to the TWSE, foreign institutional investors bought a net NT$352 million worth of shares on the main board Friday.

Source: Focus Taiwan News Channel