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Taiwan shares comes under heavy pressure amid rate hike concerns

2018/02/05 16:48:38

Taipei, Feb. 5 (CNA) Shares in Taiwan came under heavy pressure Monday, led by large cap stocks, as investors reacted to a 660-point plunge in the Dow Jones Industrial Average at the end of last week, dealers said.

The selling was sparked by growing concerns that the U.S. Federal Reserve will increase interest rates at a faster pace than anticipated after the United States reported better than expected job data for January, they said.

The weighted index on the Taiwan Stock Exchange, the Taiex, closed down 179.98 points, or 1.62 percent, at 10,946.25, after moving between 10,885.43 and 10,970.30, on turnover of NT$128.19 billion (US$4.38 billion).

The market opened down 1.40 percent in reaction to Friday's losses in New York, where the Dow posted its biggest single day loss (665.75 points, 2.54 percent) since June 2016 and the S&P 500 index saw its biggest one-day fall (59.85 points, 2.12 percent) since September 2016, dealers said.

Selling quickly escalated, with large cap stocks in the high-tech sector, such as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) and iPhone assembler Hon Hai Precision Industry Co. in focus.

It was only when bargain hunting in petrochemical stocks emerged in the latter part of the session that the broader market came off its early lows, coinciding with rebounds in other regional markets such as Hong Kong and Seoul, they said.

"The selling reflected fears that the Fed will raise its key interest rates at a quicker pace this year after the strong January job data in Washington," Mega International Investment Services Corp. analyst Alex Huang said.

In January, the U.S. created 200,000 jobs, beating an earlier market estimate of 180,000, while wages for the month increased 2.9 percent from a year earlier.

"The wage gains, in particular, struck the nerves of investors who have feared inflation will pick up and lead the Fed to raise interest rates four times this year instead of the three times previously anticipated by the market," Huang said.

Huang said that after the plunge in U.S. markets on Friday, investors here rushed to cut their holdings in liquid large cap stocks, in particular TSMC, whose valuation had raced ahead of the broader market after a recent strong showing.

TSMC, the most heavily weighted stock in the local market, fell 2.50 percent to close at NT$253.00, off an early low of NT$250.50, with 45.56 million shares changing hands.

Led by TSMC, the bellwether electronics sector closed down 2.09 percent and the semiconductor sub-index ended down 2.34 percent.

Also in the electronics sector, Hon Hai, second to TSMC in terms of market value, lost 2.52 percent to close at NT$92.50, and Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., shed 4.52 percent to end at NT$3,800.00.

"Judging from the losses suffered by these big stocks, I think foreign institutional investors stood on the sell side today," Huang said.

According to the TWSE, foreign institutional investors sold a net NT$8.34 billion in shares in Taiwan on Monday.

Huang said bargain hunters rushed to pick up petrochemical stocks late in the session, especially the subsidiaries of the Formosa Plastics Group, which had lagged behind the broader market in recent sessions.

In the petrochemical sector, which fell only 0.49 percent, Formosa Plastics Corp. rose 0.50 percent to close at NT$100.50, off a low of NT$98.00, and Formosa Chemicals & Fiber Corp. gained 0.47 percent to end at NT$107.50 after hitting NT$104.00.

(By Frances Huang)