Taiwan shares end marginally lower after Fed rate hike

Shares in Taiwan bounced back Thursday from losses early in the session but finished slightly lower, after the U.S. Federal Reserve raised its key interest rates Wednesday, citing an improvement in the U.S. economy, dealers said.

The early losses were also due to the Fed’s indication of a quicker interest rate hike in 2017 to prevent overheating of the U.S. economy, as it cited steady growth of the country’s economic fundamentals, dealers said.

The financial sector anchored the broader market on hopes that the rate hikes would boost interest spreads and earnings, dealers said.

In the electronics sector, bargain hunters rushed to pick up select high-tech stocks, helping the sector to shed its early losses by the close, dealers said.

The weighted index on the Taiwan Stock Exchange closed down 8.17 points, or 0.09 percent, at 9,360.35, after moving between 9,309.79 and 9,370.51. Turnover totaled NT$70.71 billion (US$2.22 billion) during the session.

The market opened down 0.33 percent in a knee-jerk reaction to a drop of more than 100 points on the Dow Jones Industrial Average overnight after the rate hike by the Fed and its indication of a continued cycle of increases, dealers said.

As selling on the local main board escalated, the weighted index fell close to 9,300 points before bargain hunting emerged, helping the broader market recoup most of its early losses to close marginally lower, dealers said.

“The Fed’s rate hike on Wednesday had largely been factored into the local equity market,” Taishin Securities Investment Advisory analyst Tony Huang said. “In fact, the local bourse was one of many markets that fell Wednesday in expectation of the rate hike.”

On Wednesday, the Fed raised its key interest rates by 0.25 percentage points, as was widely expected, citing a healthy U.S. economy. It was only the second rate hike by the Fed in a decade and was decided by a unanimous vote.

Fed Chairwoman Janet Yellen hinted at further hikes next year, saying the increase on Wednesday reflected confidence in the progress of the U.S. economy and the Fed’s judgement that such progress would continue.

Huang, meanwhile, said many investors are hoping that the global economy will be pulled along by the growth of the U.S. economy, the largest in the world.

“The banking business will benefit from higher interest rates as their interest spreads are likely to widen,” he said. “In addition, U.S. President-elect Donald Trump is expected to ease restrictions on banks’ operations, which is why the local financial sector outperformed the broader market Thursday.”

The local financial sector closed up 1.11 percent, with Fubon Financial Holding Co. (富邦金) climbing 2.91 percent to end at NT$53.00 and Cathay Financial Holding Co. (國泰金) gaining 2.36 percent to close at NT$49.80.

In the bellwether electronics sector, investors sought bargains late in the session, helping it to close 0.01 percent higher at 371.55, dealers said.

Among the high-tech stocks, contract chip maker Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電), the most heavily weighted stock on the local market, fell 0.27 percent to end at NT$187.00 after an early low of NT$184.50.

Bucking the downturn on the broader market, Hon Hai Precision Industry Co. (鴻海), an assembler of iPhones and iPads for Apple Inc., rose 0.60 percent to finish at NT$84.20, off an early low of NT$83.50.

“Judging from today’s movement, I think the weighted index saw strong technical support at around 8,300 points,” Huang said. “The main board is likely to move between 8,300 points and 8,500 points in the near future.

Source: Focus Taiwan News Channel

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