Taiwan shares plunge more than 100 points as TSMC dives

02/18/2020 06:55 PM

Taipei, Feb. 18 (CNA) Shares in Taiwan fell sharply Tuesday, losing more than 100 points, as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) came under heavy pressure due to a negative outlook for two of its major clients.

Selling also focused on other Taiwanese firms in the Apple Inc. supply chain after the U.S. consumer electronics giant warned overnight that it was unlikely to meet its first-quarter sales target because of the novel coronavirus epidemic in China, dealers said.

The weighted index on the Taiwan Stock Exchange (Taiex) closed down 114.53 points, or 0.97 percent, at 11,648.98, after moving between 11,642.95 and 11,717.10. Turnover stood at NT$138.78 billion (US$4.61 billion).

The market opened down 0.53 percent shortly after it was reported that the United States government was considering new restrictions against China that would limit Huawei's use of American chip-making equipment, as a way to cut off China's access to key semiconductor technology.

Selling on the main board escalated as Apple suppliers took a beating, pushing the Taiex even lower by the end of the session, after Apple warned that it was unlikely to meet its first-quarter sales guidance due to reduced iPhone production and weaker demand in China as a result of the coronavirus outbreak there, dealers said.

Both Apple and Huawei are major clients of TSMC.

"As TSMC shares plunged, investors rushed to dump other tech stocks amid worry that the stock would drag down the bellwether electronics sector and the broader market," Da Chan Securities analyst Jerry Chen said.

According to Chen, it is too early to say whether the U.S. in fact will impose further sanctions against Huawei, as reported, since American chipmakers are expected to lobby against the proposal.

Nonetheless, investors were pocketing their recent significant gains in TSMC, based on the reports, he said.

TSMC, the most heavily weighted stock on the local market, fell 2.87 percent to close at the day's low of NT$322.00, with 61.67 million shares changing hands. TSMC's losses accounted for more than an 80-point drop on the Taiex and resulted in a 1.78 percent decline in the electronics sector and a 2.56 percent drop in the semiconductor sub-index.

Selling was also seen in other semiconductor stocks throughout the session, with integrated circuit designer MediaTek Inc. falling 1.51 percent to close at NT$392.00 and IC packaging and testing service provider ASE Technology Holding Co. dropping 1.43 percent to end NT$75.60.

Among Apple suppliers, iPhone assembler Hon Hai Precision Industry Co., second only to TSMC in terms of market capitalization, lost 0.60 percent to close at NT$83.40, and Largan Precision Co., a supplier of smartphone camera lenses to Apple, slid 4.44 percent to end at NT$4,630.00.

"Apple's first-quarter outlook dealt another blow to the local technology sector, so Apple concept stocks fell in panic selling," Chen said, adding that TSMC was also affected.

However, some old economy and financial stocks bucked the downturn, lending some support to the Taiex, he said.

"I guess government-led funds entered the market, picking up those stocks to prevent further losses," Chen said.

In the financial sector, which closed up 0.36 percent, Mega Financial Holding Co. rose 1.23 percent to close at NT$32.90 and CTBC Financial Holding Co. added 0.65 percent to end at NT$23.10.

Among the gaining old economy stocks, Asia Cement Corp. rose 0.85 percent to close at NT$47.35, and China Steel Corp., the largest steel maker in Taiwan, added 0.43 percent to finish at NT$23.45.

"I think foreign institutional investors stood on the sell side today," Chen said. "They have been cutting long position contracts in the futures market and wanted to take profit as February contracts will be settled tomorrow."

According to Taiex data, foreign institutional investors sold a net NT$21.42 billion worth of shares on the main board Tuesday.

"TSMC's losses today put it closer to its nearest support point of NT$321 and if the stock cannot hold above that level, the Taiex is expected to fall further," Chen said. "In addition, the spread of the coronavirus virus is expected to continue to dictate market sentiment."

(By Frances Huang)

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