Taiwan shares suffer three-digit losses, led by large cap stocks

Taipei, Shares across the board in Taiwan dropped more than 100 points at the close of trade Tuesday as selling focused on market heavyweights, in particular in the bellwether electronics sector, dealers said.

The sell-off was triggered by a sharp depreciation of the Taiwan dollar against the U.S. dollar in the previous session, which prompted worry among investors about foreign fund flight, dealers said.

The weighted index on the Taiwan Stock Exchange ended down 144.10 points, or 1.32 percent, at 10,810.45, after moving between 10,799.07 and 10,965.20, on turnover of NT$152.43 billion (US$5.18 billion).

The market opened down 1.04 points but soon returned to positive territory in the wake of the gains on Wall Street, where the Dow Jones Industrial Average closed up 0.87 percent overnight on the back of better-than-expected corporate earnings, dealers said.

However, selling escalated at around 9:30 a.m. as investors took cues from a plunge of the Taiwan dollar against the U.S. dollar and cut their holdings, worrying that foreign institutional investors would move their funds out of Taiwan and into U.S. dollar denominated assets, dealers said.

On Monday, the U.S. dollar rose NT$0.123 to NT$29.425 against the Taiwan dollar, its highest closing rate since Jan. 22, when it ended at NT$29.432.

Currency dealers attributed the Taiwan dollar depreciation to several factors, including a possible acceleration of the U.S. Federal Reserve's interest rate hikes this year and a live-fire military exercise planned by China's People's Liberation Army in the Taiwan Strait for Wednesday.

The Taiwan dollar staged a mild technical rebound on Tuesday, closing at NT$29.362 against the U.S. dollar, but equity investors were not reassured and by the end of the session, the index had dropped more than 100 points, dealers said.

"It seemed that many investors were in panic mode, dumping stocks, which sent the trading volume to the highest level since mid-March," Mega International Investment Services Corp. analyst Alex Huang said. "The flight of foreign funds, caused by a falling Taiwan dollar, is the last thing local equity investors want."

According to the TWSE, Tuesday's trading volume was the highest since March 16, when it stood at NT$168 billion.

"I think foreign institutional investors remained on the sell side, which is why large cap stocks took such a beating today," Huang said.

According to the TWSE, foreign institutional investors sold a net NT$9.21 billion worth of shares on the main board Tuesday.

Contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock on the local market, led the downturn, falling 2.26 percent to close at NT$238.00, with 47.72 million shares changing hands.

"TSMC is not expected to find strong technical support until it reaches the NT$235.00 level," Huang said.

Pulled down by TSMC's heavy losses, the bellwether electronics sector closed 1.57 percent lower and the semiconductor sub-index fell 2.04 percent.

Also in the high-tech sector, iPhone assembler Hon Hai Precision Industry Co. which is second only to TSMC in terms of market value, dropped 1.26 percent to close at NT$86.50, and flat panel maker AU Optronics Corp. ended 3.82 percent lower at NT$12.60.

Bucking the downturn, Largan Precision Co., a smartphone camera lens supplier, rose 0.85 percent to close at NT$3,580.00 as bargain hunters continued to pick up the stock after its recent heavy losses, dealers said.

Selling was also seen among old economy stocks, including Eclat Textile Co., which shed 3.75 percent to close at NT$359.00.

Uni-President Enterprises Corp. also fell, losing 1.54 percent to end at NT$70.50, and Formosa Plastics Corp. dropped 1.40 percent to close at NT$106.00.

Huang said that in addition to the worry over fund outflows, "a possible trade war between Washington and Beijing and political tensions in the Middle East are factors that will to continue to influence investor sentiment."

Source: Focus Taiwan News Channel