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Main board's market cap down over 2%; consolidation expected

2017/12/02 12:10:45

Taipei, Dec. 2 (CNA) The market capitalization of the Taiwan Stock Exchange fell by more than 2 percent this week with selling focused on large-cap stocks, in particular in the bellwether electronics sector amid worries over the global semiconductor industry.

After this week's choppy trading, the local main board is expected to fall into consolidation mode in the near term technically to digest the remaining downward pressure before making another big leap, market analysts said Saturday.

This week, the weighted index on the main board fell 253.72 points or 2.34 percent to close at 10,600.37 points, led by electronics heavyweights such as contract chip maker Taiwan Semiconductor Manufacturing Co. (TSMC), which shed 5.33 percent after a U.S. brokerage downgraded the stock to "equal weight" from "overweight" and cut its target price to NT$239 (US$7.97), down from NT$250.

Other large cap electronics stocks also took a beating with Hon Hai Precision Industry Co., an assembler of iPhones and iPads, falling below the NT$100 mark to close at NT$99.10 on Friday, while Largan Precision Co., a smartphone camera lens supplier to Apple Inc., also dropped 10.22 percent to end at NT$5,010.00.

The three stocks are the most watched ones on the local main board, and their fluctuations dictate the movement of the market. As a result of their stock price declines, the market cap of the main board shrank by NT$742.79 billion or 2.29 percent to NT$31.68 trillion for the week.

With panic selling in large-cap stocks, turnover expanded to NT$826.34 billion this week, up from NT$618.95 billion seen last week. In particular, trading volume even reached NT$233.55 billion on Thursday, when the main board got hard hit, according to the TWSE.

During the week, foreign institutional investors sold a net NT$44.93 billion, cutting their holdings in large cap stocks.

Led by the downturn suffered by TSMC, the most heavily weighted stock in the local equity market, the semiconductor sector generated about NT$206.78 billion in turnover this week, accounting for 26.82 percent of the total.

It was followed by the optoelectronics sector with 16.18 percent and the electronics component sector with 13.37 percent.

While the U.S. brokerage cut its recommendation and target price on TSMC shares, citing concerns over slowing demand for high performance chips and escalating competition, foreign institutional investors appeared mixed about the chipmaker's outlook.

An Asian brokerage said it remained upbeat about TSMC's high-end processes, including the advanced 7 nanometer technology, adding that the chipmaker's sales compound annual growth rate during the period of 2017 to 2019 is expected to hit 15 percent.

The Asian brokerage has issued the latest target price on TSMC shares at NT$300.00.

As for the broader market, Chang Ya-wei (張亞瑋), a fund manager at the Jih Sun Jih Sun Fund, said the main board needs some time to consolidate after the latest plunge since the market has become technically weaker.

But Chang said the silver lining is that the local economic fundamentals remain sound so with market sentiment improving, the market could return to an uptrend after consolidation.

(By Tien Yu-pin and Frances Huang)