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Taiwan shares end below 10,700 points on U.S.-China trade friction

2018/07/11 17:06:16

Taipei, July 11 (CNA) Shares in Taiwan took a beating Wednesday, closing below the 10,700 point mark after the United States listed US$200 billion worth of Chinese goods that could be hit by new tariffs, escalating trade friction between the world's two largest economies, dealers said.

Investors who were shocked by the latest measures from Washington rushed to dump large cap stocks, in particular in the bellwether electronics sector, which pushed the broader market below the 10,700 point mark, they said.

However, the main board recovered some of its earlier losses with analysts suggesting bargain hunting in the session came from government-led funds in a bid to prevent the market falling further, they added.

The weighted index on the Taiwan Stock Exchange (TWSE) or the Taiex, ended down 80.05 points, or 0.74 percent, at 10,676.84, after moving between 10,635.03 and 10,693.64, on turnover of NT$118.84 billion (US$3.90 billion).

The market opened down 0.59 percent in response to the latest U.S. tariff list targeting China, pushing the Taiex below 10,700 points. Increased selling focused on market heavyweights such as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), with the broader market falling by more than 100 points at one point, dealers said.

With the Taiex moving closer to 10,600 points, some investors shifted to the buy side to pick up bargains, most of which were in the old economy and financial sectors, helping the broader market recover slightly by the end of the session, they said.

"The U.S.'s new tariffs total US$200 billion worth of Chinese goods, showing Washington's determination to take on the large trade deficit with Beijing," Mega International Investment Services Corp. analyst Alex Huang said.

On Tuesday, the Trump administration released a list of US$200 billion in Chinese goods that could be hit with 10 percent tariffs, part of a U.S. strategy to retaliate for what it sees as China's longtime unfair trade practices.

"I am afraid that China will not make any concession under Xi Jinping, who has ambitions for China to become a powerful technology country by 2025, and the situation could get worse," Huang said, referring to the policy of "Made in China 2025" Trump has tried to kill.

"It was no surprise that the local main board suffered today amid fears that the escalating trade disputes will impact the global economy and demand," he said.

The electronics sector was targeted by the latest selling, falling 0.92 percent and leading the downturn on the broader market.

Among the falling tech large cap stocks, TSMC, the most weighted stock on the local market, fell 0.90 percent to close at NT$220.00 with 19.84 million shares changing hands.

Shares in integrated circuit designer MediaTek Inc. lost 1.43 percent to end at NT$276.00, and smartphone lens supplier Largan Precision Co. fell 0.83 percent to close at NT$4,800.00.

Bucking the downturn on the broader market, iPhone assembler Hon Hai Precision Industry Co., second to TSMC in terms of market value, rose 1.37 percent to end at NT$81.60.

"Judging from the movement of falling heavyweights, I suspect selling from foreign institutional investors," Huang said. According to the TWSE, foreign institutional investors sold a net NT$8.23 billion worth of shares on the main board Wednesday.

Huang said the market received support from bargain hunting after the plunge. "Bargain hunters bought into old economy and financial stocks so I suspect the buying came from government-led funds" Huang said.

In the old economy sector, shares in Nan Ya Plastics Corp. gained 1.45 percent to close at NT$83.90, while Formosa Plastics Corp. lost 0.47 percent to end at NT$106.00, off an early low of NT$105.00.

Among financial stocks, Mega Financial Holding Co. fell 0.56 percent to close at NT$26.55 after hitting NT$26.30 and Fubon Financial Holding Co. lost 0.40 percent to end at NT$50.30, off a low of NT$49.85.

(By Frances Huang)