TSMC shares weaken after going ex-dividend; Taiex follows suit

Taipei, Shares in Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, moved lower Monday morning with investors worried it could take time for the stock to return to its price prior to the ex-dividend level amid fears over further selling by foreign institutional investors, dealers said.

A falling TSMC, the most heavily weighted stock on the local market, made investors nervous and dampened market sentiment, sending the broader market lower when the market opened and that weakness continued, they said.

As of 11:42 a.m., shares in TSMC had fallen 0.46 percent to NT$218.50 (US$7.21) with 32.83 million shares changing hands on the Taiwan Stock Exchange, where the weighted index was down 0.80 percent at 10,812.48 points.

Right after the main board opened, TSMC shares rose 0.23 percent from the closing reference level on Friday after going ex-dividend (when the share price of a stock is cut by the cash dividend per share paid to shareholders) but selling quickly set in pushing the stock into negative territory.

The reference opening level on Monday stood at NT$219.50 after a cut of NT$8.00 from the prior ex-dividend level of NT$227.50, which is equivalent to TSMC's cash dividend after 2017 earnings per share of NT$13.23.

The 2017 cash dividend per share was higher than the NT$7 issued for TSMC's 2016 EPS of NT$12.89.

"The losses suffered by TSMC reflect lingering concerns over the company's sales growth momentum in the third quarter, a traditional peak season for the semiconductor industry, as escalating trade friction between the United States and China could compromise global demand," MasterLink Securities analyst Tom Tang said.

"In addition, a plunge in the value of cryptocurrencies has also affected demand for TSMC's chips for the mining devices used in cryptocurrency transactions for the July-September period," Tang said.

A U.S. brokerage said in a research note that TSMC's sales for the third quarter might rise only 5-10 percent from the previous quarter, less than the 10-15 percent sequential increase expected by the market. The brokerage left a "neutral" rating and a target price of NT$239 unchanged.

CNA cannot identify the U.S. brokerage because media outlets in Taiwan are not allowed to report the names of foreign brokerages when they give price-moving forecasts for specific stocks or for the wider market.

"I think many foreign institutional investors, who will bag a large amount in cash dividends by keeping the stock until Friday, are on the sell side for TSMC shares today," Tang said.

In fact, some foreign institutional investors had started to unload their TSMC shares in recent sessions amid caution about the company's sales outlook, Tang said. Over the past six trading sessions, foreign institutional investors sold a net 82.32 million TSMC shares, according to the TWSE.

TSMC said it is scheduled to issue NT$207.44 billion in cash dividends for its 2017 earnings on July 19 with foreign institutional investors who own about 80 percent set to pocket the most.

Morris Chang (???), the former TSMC chairman, who retired on June 5 after 30 years at the company, is expected to pocket about NT$1 billion in dividends as he owns about 125 million TSMC shares, or a 0.48 percent stake.

The National Development Fund under the Executive Yuan, which is one of the largest single shareholders in TSMC, is expected to receive about NT$13.23 billion in cash dividends based on the 6.38 percent stake it owns.

"The poor performance of TSMC shares led investors to cut their holdings in the broader market today, which pushed the weighted index below the 10,900 point mark, the nearest technical support," Tang said. "The fall has made the main board technically weaker."

Source: Focus Taiwan News Channel