Taipei, June 1 (CNA) Shares of Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chip maker took a beating Friday morning as investors rushed to lock in the profits from the stock in the previous session, dealers said.
Foreign institutional investors are believed to be standing on the sell side, cashing in on liquid TSMC shares amid escalating concerns over the debt crisis in the eurozone, dealers said.
As of 11:08 a.m., shares of TSMC had dropped 4.58 percent to NT$81.20 (US$2.71), with 38.40 million shares changing hands. The weighted index was down 1.28 percent at 7,207.75 points.
"As one of the highly weighted stocks in the local bourse, when TSMC trends sharply lower, the broader market inevitably encounters a slump," Hua Nan Securities analyst Stan Chang said.
Since TSMC rose more than 4 percent Thursday on late session buying, the profit taking on Friday seemed obvious, he said.
"I suspect foreign institutional investors are dumping TSMC shares for cash as there have been few signs that the financial crisis in Europe will end any time soon," Chang said.
In addition to TSMC, foreign institutional selling focused on large cap financial stocks, Chang said.
Among the losing financial stocks, Fubon Financial had shed 2.70 percent to NT$28.85 and SinoPac Financial had lost 4.95 percent to NT$10.55.
As to whether these market heavyweights will come out of the current downturn, Chang said that will depend on how the European debt problems evolve.
"As long as the financial crisis in Europe continues to dictate the global markets, foreign investors are very likely to further cut their holdings in local large cap stocks like TSMC," he said.
He said the selling had little to do with TSMC's fundamentals, referring to an estimated increase in the company's sales for the second quarter.
In late April, TSMC forecast its consolidated sales for the April-June period will range between NT$126 billion and NT$128 billion, up from NT$105.51 billion in the first quarter.
The chip maker posted about NT$40.50 billion in consolidated sales for April, up 9.2 percent from a month earlier and also up 9.1 percent year-on-year. The April figure was a record high for the company, driven by strong demand for mobile devices and restocking.
With other regional bourses having recouped part or all of their losses during the Friday morning sessions, it is worth watching whether TSMC shares and other local large cap stocks will attract some bargain hunting later in the day, Chang said.
(By Frances Huang)