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Taiwan shares get boost from Fed rate cut hopes

2019/07/19 19:18:42

Taipei, July 19 (CNA) Shares in Taiwan finished higher Friday after getting a boost from rising hopes that the U.S. Federal Reserve will cut interest rates in the near future, dealers said.

Buying focused on the bellwether electronics sector, led by contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), which gave a better than expected sales forecast for the third quarter, while old economy and financial stocks appeared mixed, they said.

The weighted index on the Taiwan Stock Exchange (TWSE), the Taiex, ended up 73.91 points, or 0.68 percent, at 10,873.19, after moving between 10,861.99 and 10,919.96, on turnover of NT$122.57 billion (US$3.95 billion).

The market opened up 0.58 percent as investors rushed to buy large cap electronics stocks in reaction to a strong recovery overnight on the Dow Jones Industrial Average, which ended up 3.12 points after rebounding from an earlier 151.06-point decline, dealers said.

The Dow bounced back after New York Federal Reserve President John Williams said the Fed should "act quickly" at a time when the economy was slowing, a clear appeal for lowering interest rates.

TSMC, the most heavily weighted stock in Taiwan, led the early gains and even pushed the Taiex above the 10,900-point mark, before some investors pulled back, limiting the day's gains, dealers said.

"Since Williams is one of the voting members on the Federal Open Market Committee, his comments have strengthened market hopes that the Fed will lower its key interest rates at the end of this month, say, by 0.50 percentage points," Hua Nan Securities analyst Kevin Su said.

The Fed has scheduled a policymaking meeting for July 30-31.

"Once the Fed lowers interest rates to send the U.S. dollar lower, funds are expected to exit the American market but enter regional markets, and markets including Taiwan could enjoy ample liquidity," Su said.

Combined with the rate cut hopes, an upbeat sales forecast for the third quarter given by TSMC a day earlier led investors to pick up large cap tech stocks, in particular in the semiconductor sector, Su said.

TSMC rose 1.97 percent to close at NT$259.00, with 59.64 million shares changing hands, after the chipmaker said it could post US$9.1 billion to US$9.2 billion in consolidated sales for the third quarter, which would be up 18 percent from the second quarter.

TSMC's gains alone contributed to an increase of about 50 points in the Taiex, and boosted the semiconductor sub-index by 1.87 percent and the electronics sector by 1.16 percent.

Buying also spread to other integrated circuit stocks with IC packaging and testing services provider ASE Technology Holding Co. up 4.14 percent to close at NT$70.40, and dynamic random access memory chip maker Nanya Technology Corp. up 1.50 percent to end at NT$67.70.

Bucking the uptrend, Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., fell 0.24 percent to close at NT$4,140.00, off a high of NT$4,250.00, on profit taking.

"Since today's market attention was largely drawn by TSMC and the semiconductor sector, many non-tech stocks seemed to fall off the radar," Su said.

In the old economy sector, textile maker Far Eastern New Century Corp. fell 1.87 percent to close at NT$31.55, Formosa Plastics Corp. lost 0.49 percent to end at NT$101.00, and Formosa Chemicals & Fibre Corp. dropped 0.31 percent to close at NT$96.50.

But U-Ming Marine Transport Corp. gained 4.42 percent to end at NT$36.65 in the wake of an increase in freight fees.

Among the mixed financial stocks, Fubon Financial Holding Co. rose 0.12 percent to close at NT$43.50, while CTBC Financial Holding Co. fell 0.49 percent to end at NT$20.50, and Cathay Financial Holding Co. lost 0.12 percent to close at NT$41.05.

"Judging from today's Taiex movement, technical resistance ahead of the 10,900-point mark remained stiff, so the main board saw some profit-taking and failed to end above that level," Su said.

"Investors should pay close attention to the corporate earnings season taking place right now at home and in the U.S.," Su said. "And don't forget the lingering trade friction between Washington and Beijing."

According to the TWSE, foreign institutional investors bought a net NT$8.16 billion worth of shares Friday.

(By Frances Huang)
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