Taiwan shares reverse earlier upturn ahead of Fed meeting

Taipei, April 30 (CNA) Shares in Taiwan closed down almost 100 points below the 20,400-point mark Tuesday, reversing earlier gains amid caution ahead of a policymaking meeting scheduled by the U.S. Federal Reserve to open later in the day, dealers said.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 98.92 points, or 0.48 percent, at the day's low of 20,396.60 after coming off a high of 20,559.97. Turnover totaled NT$357.59 billion (US$10.97 billion).

The market opened up 12.96 points and buying continued as the bellwether electronics sector moved ahead in the wake of a 0.35 percent increase on the tech-heavy Nasdaq index and a 0.64 percent rise on the Philadelphia Semiconductor Index overnight, dealers said.

Market volatility

But selling followed and increased, particularly in the late trading session, pushing down large-cap tech stocks, including contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), and smartphone IC designer MediaTek Inc., which sent the broader market negative, dealers added.

"The initial gains on the local main board largely reflected the mild U.S. tech gains," Cathay Futures Consultant analyst Tsai Ming-han said. "But as the Taiex rebounded sharply since a plunge on April 19, it was time for a pause."

On April 19, the Taiex closed down 774.08 points, the biggest ever single-day drop, and fell by as much as 1,009.32 during the trading day, the second biggest intraday fall on record. Before Tuesday, the index had bounced back by 968.40 points or 4.96 percent since April 19.

U.S. Fed meeting

"More significantly, sentiment turned cautious as many investors wait for a two-day Fed policymaking meeting to open Tuesday (U.S. time) due to sticky inflation in the U.S.," Tsai said.

"The markets around the world are watching closely as to when the Fed will begin its rate cut cycle," Tsai said.

Tsai said the tech sector in the U.S. markets moved in consolidation, as did the local electronics sector.

After TSMC, the most heavily weighted stock in the local market, fell 0.63 percent to close at NT$790.00 -- off a high of NT$802.00 -- the electronics index lost 0.43 percent and the semiconductor sub-index lost 0.60 percent.

"It seemed that TSMC encountered short-term technical resistance ahead of the NT$800.00 mark," Tsai said. "Without a highflying TSMC, it is unlikely Taiex will make a significant rebound."

TSMC selling in the late session spread to other semiconductor heavyweights with MediaTek falling 2.27 percent to end at NT$992.00, and dynamic random access memory (DRAM) chip supplier Nanya Technology Corp. dropping 2.07 percent to close at NT$66.10.

Bucking the downturn, United Microelectronics Corp., a smaller contract chipmaker, rose 0.60 percent to end at NT$50.70, and IC packaging and testing services provider ASE Technology Holding Co. gained 0.68 percent to close at NT$148.00.

Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. lost 1.58 percent to end at NT$156.00, and Yageo Corp., the world's third largest multilayer ceramic capacitor (MLCC) supplier, also fell 0.95 percent to close at NT$625.00.

Old economy sector

Tsai said the old economy sector also felt the pinch resulting from uncertainty over the timing of rate cuts by the Fed.

The paper industry suffered relatively heavier losses among the major old economy industries, down 2.02 percent, with Shihlin Paper Corp. down 3.10 percent to close at NTT$65.60, and Chung Hwa Pulp Corp. down 3.94 percent to end at NT$23.15.

In the transportation industry, which fell 1.03 percent amid concerns over a supply glut in cargo shipping capacities, Evergreen Marine Corp., the largest container cargo shipper in Taiwan, lost 1.04 percent to close at NT$189.50, and rival Yang Ming Marine Transport Corp. fell 1.32 percent to end at NT$52.20.

The financial sector lost 0.35 percent with Fubon Financial Holding Co. down 0.43 percent to close at NT$69.10, and Cathay Financial Holding Co. down 0.59 percent to end at NT$50.50.

"In addition to the Fed meeting, the ongoing earnings season in the U.S. market will also shift tech shares this week. This will also influence their counterparts in Taiwan," Tsai said, referring to the results from American tech giants including Apple Inc. and Qualcomm Inc.

According to the TWSE, foreign institutional investors bought a net NT$2.34 billion worth of shares on the main board Tuesday.