Taiwan shares plunge amid concerns over fund exodus

Taipei, Shares in Taiwan took a beating Wednesday, falling below the nearest technical support of the 240-day moving average of 10,799 points and even approached the 10,700 point mark amid fears over fund outflows from the region, dealers said.

Such concerns have risen following the free-fall of the Turkish lira, with the plunging unit triggering the selling of currencies in the region, including the Taiwan dollar, dealers said, adding that equity investors seized on the moment to cut their holdings.

The weighted index on the Taiwan Stock Exchange (TWSE) or the Taiex ended down 107.48 points, or 0.99 percent, at 10,716.75, after moving between 10,688.59 and 10,827.28, on turnover of NT$132.62 billion (US$4.30 billion).

The market opened up 3.05 points at the day's high, but selling soon set in as investors ignored a higher Wall Street, where the Dow Jones Industrial Average stopped a four-day slide overnight by closing 0.45 percent higher, dealers said.

Downward pressure escalated with the bellwether electronics sector in focus as market sentiment was hit by worries over a further foreign fund exodus from the region in the wake of the continued weakness of currencies in the region, they said.

"Today's sell-off has made the local main board technically weaker since the Taiex failed to stay above the 240-day moving average," MasterLink Securities analyst Tom Tang said.

"The plunge has paved the way to further losses down the road at a time of fragile sentiment caused by negative leads from the lira," he added.

The lira had shed more than 20 percent over the past two months before the currency staged a slight rebound overnight. The Turkish currency, in particular, has come under heavy pressure in recent sessions amid rising tensions between the country and the United States.

Other currencies, including the Taiwan dollar, also came under pressure with the U.S. dollar index, which tracks the currencies of Washington's six major trading partners hitting 96.82 on Tuesday, the highest since late June 2017.

"Today's sell-off reflected fears over a possible fund outflow from the region due to currency weakness. As many equity investors simply do not like depleting liquidity in the market, they took the money and ran today," Tang said.

"The relatively low turnover showed many investors were reluctant to hunt for bargains even though stocks were hammered because they were losing confidence in future market movement," he said.

Tang said liquid large cap stocks, in particular the electronics sector, were the target of market bears with the high tech sub-index down 1.33 percent at the end of the session.

Among falling electronics stocks, Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock on the local market, lost 0.82 percent to close at NT$241.50, off an early low of NT$239.50, with 18.44 million shares changing hands.

Also in the high-tech sector, shares in PC brand Asustek Computer Inc. lost 2.61 percent to end at NT$243.00, and rival Acer Inc. shed 2.70 percent to close at NT$23.40 as investors feared their operations in Turkey will be affected by the weakening lira.

"I am also worried about the heavy losses suffered by passive electronics stocks. Since they have been the favorite of local investors, their downturn meant not only foreign investors but also their local counterparts are cutting back investments," Tang said.

Among the firms which roll out passive components such as chip resistors and multi-layer ceramic capacitors (MLCC), Yageo Corp. shed 4.24 percent to close at NT$610.00 and rival Walsin Technology Corp. lost 2.58 percent to end at NT$245.50.

The silver lining was that some investors preferred to park their funds in select stocks in the retail sector as a safe haven during the current peak season, lending some support to the broader market, Tang said.

Shares in President Chain Store Corp., which operates the 7-Eleven convenience store chain in Taiwan, rose 0.80 percent to close at NT$315.00, and Ruentex Industries Ltd., which owns hypermarket assets, gained 5.22 percent to end at NT$62.50.

According to the TWSE, foreign institutional investors bought a net NT$3.08 billion worth of shares on the main board on Wednesday.

Source: Focus Taiwan News Channel