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Brokerage cuts target price for TSMC before investor conference

2018/10/15 19:11:24

Taipei, Oct. 15 (CNA) An Asia-based brokerage has cut its target price for Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, amid caution ahead of a TSMC investor conference on Oct. 18.

While TSMC's fundamentals remain sound, the Asian securities house said it still lowered the stock's target price because TSMC could feel the pinch of unfavorable external factors, in particular an interest rate hike cycle by the U.S. Federal Reserve.

In a research note released three days ahead of the investor conference, the brokerage said it has cut its target price for TSMC to NT$211 (US$6.82) from NT$223, and downgraded its recommendation on the stock to "underweight" from "hold."

On Monday, TSMC shed 2.74 percent to close at the day's low of NT$230.50 on the Taiwan Stock Exchange amid rising fears over trade tension between the United States and China and concerns over fund outflows.

The brokerage said it took into account potential rate hikes by the Fed at a time when the market is concerned the Fed will accelerate rate hikes to tighten monetary policy as economic growth strengthens.

A move by the Fed to speed up rate increases would boost the U.S. dollar, which would in turn lead investors to send funds out of Asia and into U.S.-dollar denominated assets, the brokerage said, and that loss of liquidity could hurt markets in the region.

The Asian brokerage said liquid TSMC could be one of the major victims of foreign institutional investor selling as the weakness of the Taiwan dollar against the U.S. dollar makes non-greenback denominated assets less attractive.

Last week, foreign institutional investors sold a net 72.66 million TSMC shares, the largest net sell of any listed company on Taiwan's market.

The silver lining, the brokerage said, was that TSMC, the most heavily weighted stock in Taiwan's market, could have strong support from government-led funds to keep the market strong ahead of nationwide local elections on November 24.

TSMC's investor conference on Thursday will be watched closely by investors because it is seen as a benchmark of both the semiconductor industry and Apple supply chain.

CNA cannot identify the brokerage because media outlets in Taiwan are not allowed to report the names of foreign brokerages when they give price-moving forecasts for specific stocks or the wider market.

(By Jeffrey Wu and Frances Huang)