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Local bourse hit by weakening high tech stocks

2012/04/27 15:29:25

Taipei, April 27 (CNA) The local bourse moved lower to end below 7,500 points Friday as certain large-cap high tech stocks encountered heavy selling amid concerns over their earnings outlook for the second quarter, dealers said.

Led by Hon Hai Precision, cellphone-related firms ended lower after Hon Hai's subsidiary, Foxconn International Holdings, issued a profit warning on the Hong Kong Stock Exchange, the dealers said.

Meanwhile, Taiwan Semiconductor Manufacturing Co. (TSMC) bucked the falling index to boost the local integrated circuit sector after the world's largest contract chip maker posted better-than-expected earnings for the first quarter, they added.

The weighted index closed down 40.85 points or 7,480.50 percent at 7,480.50, after moving between 7,459.75 and 7,598.45, on turnover of NT$93.91 billion (US$3.20 billion).

The market opened up 0.73 percent and moved to the day's high on an overnight rise on Wall Street because of rising hopes that the U.S. Federal Reserve will come up with further liquidity-easing measures, the dealers said.

However, profit taking set in with selling in certain electronics heavyweights escalating to send the index into the red at the end of the session as sentiment turned gloomy toward the global mobile phone market, they said.

Hon Hai closed down 4.52 percent at NT$99.30 after one of its subsidiaries, Foxconn International Holdings, which assembles cellphones for well-known brands such as Nokia and Motorola, said its losses for the first half of this year are likely to expand from the corresponding period of last year.

"The profit warning indicated that the global mobile phone market remains weak in the second quarter, defying conventional wisdom that this particular business tends to improve during the April-June period," Grand Cathay Securities analyst Mars Hsu said.

Hsu said a cautious sales guidance for the second quarter issued by cellphone camera lens supplier Largan Precision also dampened market confidence. Largan fell 7 percent, the maximum allowable daily decline, to close at NT$498.50, while smartphone vendor HTC shed 6.18 percent to end at NT$425.00.

Fortunately, Hsu said, the gains posted by TSMC helped the broader market avoid further losses. The chip maker closed up 2.38 percent at NT$86.00.

The analyst said concerns over a possible capital gains tax on stock investments and fears about the debt crisis in the eurozone continued to weigh on investor confidence.

"Amid weak sentiment toward the market outlook, investors tended to pocket profits after the index moved higher," Hsu said. "I expect the market to face further downward pressure to test the 7,250 point level in the near term," he added.

At the end of the session, the cement sector faced the stiffest resistance among the eight major stock categories, finishing down 1.6 percent after several cement firms forecast that their operations in China would report falling sales for the first quarter.

Paper and pulp stocks fell 1.2 percent, machinery and electronics shed 1.0 percent, construction shares lost 0.5 percent and textiles closed down 0.3 percent.

Foodstuffs rose 1.5 percent, and plastics and chemicals gained 0.1 percent, while the financial sector closed unchanged.

(By Frances Huang)