Taipei-Shares in Taiwan took a beating Monday as the electronics sector came under heavy downward pressure after a U.S. brokerage downgraded a rating on contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), dealers said.
The financial sector also faced selling which pushed the broad market down further amid worries that life insurance companies could suffer large foreign exchange losses from their sizable overseas investments due to a stronger Taiwan dollar, they said.
The weighted index on the Taiwan Stock Exchange (TWSE) closed down 103.16 points, or 0.95 percent, at 10,750.93, after moving between 10,746.74 and 10,856.00 on turnover of NT$133.40 billion (US$4.45 billion).
The market opened down 0.16 percent as investors ignored a new record high posted by the S&P 500 index on Friday amid hopes of a strong buying spree in the holiday season. The weakness of the local market continued as the high-tech sector moved lower, dealers said.
The bellwether electronics sector was hit as TSMC shares fell after a research note released by a U.S. brokerage cut its recommendation on the stock from "overweight" to "equal weight," citing worries over a drop in demand for high performance computing chips on the world market as one of the reasons for the downgrade, they said.
Selling in the high-tech sector escalated and that together with a weaker financial sector pushed down the weighted index by more than 100 points by the end of the session, they added.
"Without a stable TSMC, it was unlikely that the broader market would perform well," KGI Securities analyst Phil Chu said. "Even worse, the selling spread to other electronics heavyweights throughout the session."
TSMC, the most heavily weighted stock on the local market, shed 2.87 percent to close at NT$237.00 with 32.20 million shares changing hands. Led by TSMC, the bellwether electronics sector closed down 1.40 percent and the semiconductor sub-index ended down 1.63 percent.
Among other falling large-cap stocks, shares in Hon Hai Precision Industry Co., an assembler of iPhones and iPads, fell 1.44 percent to close at NT$103.00, and Largan Precision Co., a smartphone camera lens supplier to Apple Inc., shed 4.48 percent to end at NT$5,330.00.
Bucking the downturn in the electronics sector, Advanced Semiconductor Engineering Inc. (ASE) and Siliconware Precision Industries Co., the top two integrated circuit packaging and testing service providers in Taiwan, rose 8.44 percent and 3.20 percent, respectively, to NT$41.75 and NT$50.00 after a merger plan for the two firms secured conditional approval from China's Ministry of Commerce on Friday.
Elsewhere, Chu said, the financial sector was down 0.94 percent at the close of trading as fears rose that life insurance firms, which have already invested heavily overseas, will suffer large foreign exchange losses.
Among the falling large cap financial stocks, Cathay Financial Holding Co., which owns flagship Cathay Life Insurance, fell 2.24 percent to close at NT$52.40, and Fubon Financial Holding Co., which also operates a large life insurance entity -- Fubon Life Insurance -- lost 1.48 percent to end at NT$49.85.
"Judging from the losses suffered by market heavyweights, I think foreign institutional investors stood on the sell side today," Chu said.
TWSE later confirmed that foreign institutional investors sold a net NT$8.29 billion worth of shares on the main board Monday.
"The weighted index fell below the technical support level of the 20-day moving average at about 10,758 and came to a critical moment," Chu said. "If the main board cannot stage a quick rebound to 10,800 points and continues to fall over the next few sessions, more selling will follow."
Source: Focus Taiwan News Channel