Taiwan shares plunge below 18,000 points after U.S. volatility

01/21/2022 06:13 PM
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Taipei, Jan. 21 (CNA) Shares in Taiwan moved sharply lower Friday to close below 18,000 points for the first time in almost a month, hurt by losses on U.S. markets amid concerns over possible rate hikes by the Federal Reserve, dealers said.

Selling was seen almost across the board, with the bellwether electronics sector leading the downturn as rising interest rates would make tech stocks look less attractive, they said.

The Taiex, the Taiwan Stock Exchange's benchmark weighted index, ended down 318.98 points, or 1.75 percent, at 17,899.30, after moving between 17,851.39 and 18,113.94. Turnover totaled NT$304.17 billion (US$10.98 billion).

The market opened down 0.57 percent after the Dow Jones Industrial fell 0.89 percent and the tech-heavy Nasdaq index lost 1.30 percent overnight on an increase of the 10-year treasury yield rose to 1.87 percent, reflecting expectations of tighter monetary policy.

Downward pressure was present throughout the session, first with the electronics sector but then spreading to many non-tech stocks, pushing the Taiex below 18,000 points for the first time since Dec. 24, 2021.

U.S. interest rates

"U.S. President Joe Biden has voiced his support for the Fed to raise its key interest rates as American consumers are faced with growing inflationary pressure," MasterLink Securities analyst Tom Tang.

"I think the Fed is now coming under more pressure to kick off a rate hike cycle. Many in the market are anticipating rates will start to rise in March."

Tang noted that some analysts are now predicting a rate hike of 0.5 percentage points in March rather than a 0.25 percentage point hike previously expected by most market observers, which he said could be a "disaster for tech stocks."

Tang said it was no surprise that the electronics sector followed U.S. tech stocks in losing ground Friday.

TSMC

"Liquid tech heavyweights such as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) faced selling soon after the local market opened as investors relocated their funds to other instruments offering higher returns," Tang said.

TSMC, the most heavily weighted stock in the local market, lost 1.54 percent to close at NT$641.00 after hitting a low of NT$637.00. Led by TSMC, the electronics sector lost 1.75 percent, and the semiconductor sub-index was down 1.72 percent.

"The bright side was that TSMC, which remains fundamentally sound, appeared resilient to some extent after the stock saw last-ditch buying to come off the day's low," Tang said.

"As its business outlook remains rosy, TSMC shares may not fall much further."

Other tech stocks

Among other semiconductor stocks, United Microelectronics Corp., a smaller contract chipmaker, lost 1.10 percent to end at NT$82.80, and smartphone chip designer MediaTek Inc. dropped 1.83 percent to close at NT$1,070.00.

Integrated circuit packaging and testing services provider ASE Technology Holding Co. shed 3.79 percent to end at NT$101.50.

Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. fell 0.97 percent to close at NT$102.00, while Largan Precision Co. ended unchanged at NT$2,080.00.

Outside tech sector

The petrochemical sector lost 1.48 percent after crude oil prices fell more than 2 percent in Asia on Friday morning.

Formosa Plastics Corp. closed 2.33 percent lower at NT$105.00, Formosa Petrochemical Corp. ended down 1.43 percent at NT$96.70, and Nan Ya Plastics Corp fell 1.14 percent to close at NT$86.40.

Another stock sensitive to crude oil prices, textile brand Far Eastern New Century Corp., ended down 1.54 percent at NT$28.80.

Selling also affected shipping stocks, sending the transportation sector down 4.92 percent.

Among them, Evergreen Marine Corp., the largest container cargo shipper in Taiwan, shed 6.85 percent to close at NT$115.50, and rivals Yang Ming Marine Transport Corp. and Wan Hai Lines Ltd. lost 4.81 percent and 5.90 percent, respectively, to end at NT$99.00 and NT$151.50.

COVID-19 cocerns

Amid rising concerns over domestically transmitted COVID-19 cases, select virus prevention stocks bucked the downturn.

Face mask brand Universal Inc. rose 3.35 percent to close at NT$52.50, and test kit provider Panion & BF Biotech Inc. soared 6.68 percent to end at NT$83.00.

"Today's selling showed fragile market confidence amid global volatility," Huang said.

"There are only three trading sessions to go before the Lunar New Year holiday, and I think many investors are getting reluctant to hold on to their stocks as they fear negative leads will emerge during the holiday."

Taiwan's stock markets will be closed from Jan. 27 to Feb. 6.

According to the Taiwan Stock Exchange, foreign institutional investors sold a net NT$40.04 billion in shares Friday.

(By Frances Huang)

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