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Taiwan shares dive after Wall Street's heavy losses (update)

2018/02/09 12:07:05

Taipei, Feb. 9 (CNA) Taiwan shares took a beating Friday morning following a plunge on Wall Street overnight amid rising concerns over possible higher interest rates in the United States, dealers said.

The bellwether electronics sector again led the drop of the broader market in Taiwan, with large cap stocks such as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) at the forefront, dealers said.

As of 10:58 a.m., the weighted index on the Taiwan Stock Exchange had fallen 251.42 points, or 2.39 percent, to 10,277.10, off an early low of 10,189.04 on turnover of NT$88.02 billion (US$2.99). It followed a 1,033-point dive of the Dow Jones Industrial Average on Thursday.

TSMC, the most heavily weighted stock on the Taiwan market, was down 3.77 percent Friday morning at NT$229.50 with 33.58 million shares changing hands, while iPhone assembler Hon Hai Precision Industry Co., second only to TSMC in terms of market value, had dropped 2.13 percent to NT$87.10.

Also in the electronics sector, which fell 2.76 percent, Largan Precision Co., a smartphone camera lens supplier to Apple Inc. had dropped 4.43 percent to NT$3,560.00.

"Looking at the high turnover, I think investors are dumping their stocks in panic," Mega International Investment Services Corp. analyst Alex Huang said. "They got another shock from the drop on Wall Street overnight."

On Thursday, the Dow shed more than 500 points for the third time in five days, dropping below 24,000 points to its lowest level since Nov. 28, 2017, amid worry that the U.S. Federal Reserve will speed up its interest rate hike cycle as the country's economy strengthens.

"After the initial weekly jobless benefit claims in the U.S. showed a drop Thursday, investors have become more concerned that the solid economic growth would spur inflation and prompt the Fed to raise interest rates more quickly," Huang said.

In an interview with Bloomberg on Thursday, New York Federal Reserve President Bill Dudley said that if the U.S. economy keeps growing, the Fed is likely to raise interest rates four times this year.

The market had been anticipating no more than three interest rate hikes this year.

"It was no surprise that investors on Wall Street dumped their holdings overnight and other world markets, including Taiwan, followed suit today," Huang said.

In Taiwan, the selling spread from tech stocks to the non-high tech sector, with Formosa Plastics Corp. down 2.30 percent at NT$97.70, and Nan Ya Plastics Corp. falling 2.57 percent to NT$75.70 as of 10:58 a.m.

The financial sector appeared somewhat more resilient, slipping only 1.21 percent, with Cathay Financial Holding Co. dropping 1.32 percent to NT$52.60, and Fubon Financial Holding Co. down 1.19 percent at NT$50.00.

Huang said the heavy losses Friday morning reflected selling by foreign institutional investors to remit funds back home after the plunge on Wall Street.

According to the TWSE, foreign institutional investors sold NT$64.75 billion worth of shares on the main board in the first four session of the week.

"The movement of the local equity market will continue to follow that of Wall Street," Huang said.

(By Frances Huang)