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Taiwan shares plunge over 180 points

2018/06/19 16:59:27

Taipei, June 19 (CNA) Shares in Taiwan came under heavy downward pressure Tuesday, dropping more than 180 points, to close at the day's low amid escalating trade friction between the United States and China, dealers said.

The bellwether electronics sector led the downturn, with large-cap stocks, in particular Taiwan Semiconductor Manufacturing Co. (TSMC) -- the most heavily weighted stock in the local market -- in focus, while selling also spread to heavyweights in the old economy and financial sectors to drag down the broader market further at the close, the dealers said.

In addition to the simmering trade dispute between Washington and Beijing, investors have feared that a weakening Taiwan dollar will lead to more fund outflows from the country and further deplete liquidity in the equity market, they added.

The weighted index on the Taiwan Stock Exchange (TWSE) or Taiex closed down 183.28 points, or 1.65 percent, at the day's low of 10,904.19, off an early high of 11,008.77, on turnover of NT$169.50 billion (US$5.63 billion).

The market opened down 0.71 percent in a knee-jerk reaction to deteriorating trade ties between Washington and Beijing after both sides imposed heavy tariffs on each other's goods last week, the dealers said.

Selling escalated without signs of any immediate technical rebound as tech heavyweights such as TSMC led the downturn to push down the Taiex below the 11,000-point mark and even to a level close to 10,900 points at the close of the session, they said.

"Judging from the sell-off, I think foreign institutional investors stood on the sell side throughout the session amid rising concerns over a possible trade war between the world's two largest economies," Mega International Investment Services Corp. analyst Alex Huang said.

According to the TWSE, foreign institutional investors sold a net NT$21.36 billion-worth of shares on the main board Tuesday.

U.S. President Donald Trump announced the imposition of an additional 25 percent tariff worth US$50 billion on Chinese goods such as machinery, robotics, aerospace items, information technology devices and auto products, starting from July 6.

In retaliation, China announced that a 25 percent tariff worth US$34 billion will be imposed on U.S. goods, including soybeans and electric vehicles, starting July 6. Another list of U.S. goods worth US$16 billion will be subject to review before being applied.

On Monday, Trump threatened to impose a 10 percent tariff on US$200 billion-worth of Chinese goods, which is making trade friction run deeper.

"I think the US$200 billion-worth of Chinese goods that could be affected sound particularly scary," Huang said. "I am not upbeat at all about whether the U.S. and China will reach any agreement by July 6 to reduce the tension, since both sides seem to have lost mutual trust."

TSMC, the world's largest contract chipmaker, fell NT$6 or 2.60 percent to close at NT$225.00, with 56.85 million shares changing hands. TSMC's losses dragged down the Taiex about 60 points and led the bellwether electronics sector and the semiconductor sub-index to move down by 2.04 percent and 2.34 percent, respectively.

MasterLink Securities analyst Tom Tang said TSMC cannot find technical support unless it moves closer to NT$220.00 as foreign investors continued to dump the stock to pocket their earlier gains.

Other tech heavyweights also suffered steep losses, with iPhone assembler Hon Hai Precision Industry Co., second to TSMC in terms of market value, down 2.35 percent to end at NT$83.00, and Largan Precision Co., a smartphone camera lens supplier to Apple, down 5.23 percent to close at NT$4,350.

In the financial sector, which fell 1.30 percent, Fubon Financial Holding Co. lost 1.30 percent to close at NT$53.00, Mega Financial Holding Co. dropped 1.50 percent to end at NT$26.35, and CTBC Financial Holding Co. shed 2.48 percent to close at NT$21.60.

Among the falling old economy stocks, Nan Ya Plastics Corp. fell 2.13 percent to close at NT$82.80, and Taiwan Cement Corp. dropped 3.09 percent to end at NT$43.85. "Looking at a depreciating Taiwan dollar, I think many investors have deeper worries about further fund outflows as foreign investors rush to park their funds in U.S. dollar-denominated assets," Huang said.

"It is possible that selling in the local equity market will continue," Huang said. "If the Taiex falls below the 125-day moving average of 10,842 points in the short term, further downward pressure is possible for the index to test 10,700 soon."

(By Frances Huang)