Taipei, July 12 (CNA) Shares in Taiwan closed lower Friday as investors locked in earlier gains caused by a higher Wall Street amid hopes that the U.S. Federal Reserve will kick off an interest rate cut cycle later in July, dealers said.
Selling in select tech heavyweights in the Apple Inc. supply chain pushed down the broader market into negative territory, while the semiconductor sector remained resilient, preventing the broader market from falling further, the dealers said.
The weighted index on the Taiwan Stock Exchange, or Taiex, ended down 19.07 points, or 0.18 percent, at 10,824.35, after moving between 10,823.89 and 10,867.59, on turnover of NT$120.6 billion (US$3.88 billion).
The market opened up 0.11 percent on follow-through buying from a session earlier, when the Taiex ended up 0.42 percent, and rose to the day's high in the mid-morning session as investors took cues from the gains posted in the U.S. markets, where the Dow Jones Industrial Average saw a 0.88 percent increase to top 27,000 points overnight as a result of optimism toward the Fed's rate cut, the dealers said.
However, selling followed, as some large cap Apple concept stocks and non-tech stocks came under pressure, with investors shifting to the sell side to send the Taiex lower than the previous close, although contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) still moved higher to offset the losses on the broader market, they said.
"The earlier gains largely reflected higher expectations of a rate cut by the Fed later this month after Fed Chair Jerome Powell made dovish comments on U.S. monetary policy in a two-day hearing in Congress (that ended Thursday)," Hua Nan Securities analyst Kevin Su said.
The Fed has scheduled a policymaking meeting for July 30-31 and Su said the market widely anticipates that the U.S. central bank will lower its key interest rates by 0.25 percentage points in the meeting.
"However, such rate cut hopes have been largely factored in the Taiex over the past few sessions, so that investors today pocketed their gains posted in recent sessions," Su said.
Selling in big tech stocks in the Apple supply chain served as a driver to the losses suffered by the main board by the end of the session, with the bellwether electronics sector ending down 0.12 percent.
Among the falling Apple concept stocks, Largan Precision Co., a smartphone camera lens supplier, lost 2.32 percent to close at NT$4,205.00 after hitting a high of NT$4,360.00, although the company reported a day earlier that its net profit for the April-June period rose 29.63 percent from the previous quarter and grew 19.07 percent from a year earlier to NT$6.55 billion.
Also in the tech sector, iPhone assembler Hon Hai Precision Industry Co. was traded below the previous closing level during most of the session, down 0.77 percent to end at NT$77.60 after hitting a high of NT$78.20.
Bucking the downturn, TSMC, the most heavily weighted stock in the local market, rose 0.20 percent to close at NT$250.50, off a high of NT$252.00, with 23.45 million shares changing hands. TSMC's gains boosted the Taiex by 5 points and Su said a stable TSMC helped stem the Taiex losses to some extent.
Other semiconductor stocks in the memory chip industry also got a boost on the back of recovering product prices, giving additional support to the main board, with Nanya Technology Corp. up 1.99 percent to end at NT$66.70, and Macronix International Co. up 4.31 percent to close at NT$26.60.
Downward pressure pushed down the financial sector, which ended down 0.25 percent, as future rate cuts in the U.S. could trigger a rate reduction in Taiwan, which is expected to squeeze banks' bottom lines by narrowing their interest rate spread, Su said.
Among the falling financial stocks, Fubon Financial Holding Co. lost 0.57 percent to close at NT$43.95, CTBC Financial Holding Co. fell 0.69 percent to end at NT$21.60 and Cathay Financial Holding Co. shed 0.83 percent to close at NT$41.60.
In the mixed old economy sector, Asia Cement Corp. lost 2.23 percent to end at NT$46.10 and food brand Uni-President Enterprises Corp. fell 1.20 percent to close at NT$82.00, while Formosa Plastics Corp. gained 1.46 percent to end at NT$104.00.
"Even if the main board stages a technical rebound, the room for gains could be limited, since uncertainty over trade friction between Washington and Beijing remains a headache for many investors," Su said.
According to the TWSE, foreign institutional investors sold a net NT$468.22 million-worth of shares on the main board Friday.