Taiwan shares end lower amid worry over hawkish Fed

09/22/2022 06:09 PM
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CNA photo Sept. 22, 2022
CNA photo Sept. 22, 2022

Taipei, Sept. 22 (CNA) Shares in Taiwan fell Thursday amid volatility on the United States markets, after the U.S. Federal Reserve again raised interest rates to combat inflation and hinted at more rate hikes, dealers said.

The local main board, however, recouped some of its early losses, as bargain hunters rushed in later to pick up large-cap stocks, including contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), and some shares in the old economy and financial sectors, dealers said.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 139.89 points, or 0.97 percent, at 14,284.63, after moving between 14,151.80 and 14,325.67. Turnover totaled NT$208.53 billion (US$6.6 billion).

The market opened down 0.69 percent and soon fell to the day's low, shedding about 270 points, as selling was sparked by the losses on the U.S. markets, where the Dow Jones Industrial Average lost 1.70 percent and the tech-heavy Nasdaq index dropped 1.79 percent overnight, dealers said.

The bellwether electronics sector led the initial downturn, after the Fed on Wednesday raised interest rates by 75 basis points and hinted that more rate hikes would follow, but the market's downturn was cushioned by bargain hunting late in the session, dealers said.

"It seemed that some market players did not want to see the Taiex fall below 14,000 points, so they jumped onto the trading floor to lend support to the main board, after the volatility on the U.S markets," Concord Securities analyst Kerry Huang said, adding that some of the buying probably came from government-led funds.

U.S. rate hike

"The Fed appeared firm about fighting inflation, signaling continued aggressive action in its rate hike cycle. It may raise interest rates by another 75 basis point in November," Huang said, citing a prediction by FedWatch.

After the Fed policymaking meeting on Wednesday, Fed Chairman Jerome Powell said he and his colleagues were "strongly committed to bringing inflation back down to our 2 percent goal."

In addition, the "dot-plot", which the Fed uses to signal its outlook for the path of interest rates, indicated that there would be no rate cuts until 2024.

Huang said large-cap tech stocks on the Taiex were selling targets Thursday, as foreign institutional investors continued to move their funds out of the region and into U.S. dollar denominated assets.

TSMC, tech stocks

TSMC, the most heavily weighted stock on the local market, closed down 1.38 percent at NT$464.50, after a hitting a low of NT$459.00 during the session.

"Judging from TSMC's movement, it seemed that some investors wanted to push it back to the NT$460.00 level, and buying in the stock was the best way to support the broader market," Huang said.

According to the TWSE, foreign institutional investors sold a net NT$19.46 billion worth of shares on the main board Thursday.

Some other semiconductor stocks were left out of the bargain hunting, and United Microelectronics Corp., a smaller contract chipmaker, fell 2.15 percent to end at NT$38.75, while smartphone IC designer MediaTek Inc. lost 2.31 percent to close at NT$591.00, and application-specific IC (ASIC) designer Alchip Technologies Ltd. ended down 5.56 percent at NT$950.00.

Also in the electronics sector, which lost 0.95 percent, iPhone assembler Hon Hai Precision Industry Co., second only to TSMC in terms of market capitalization, appeared resilient and closed unchanged at NT$107.00, after coming off a low of NT$106.00.

Old economy sectors

"I think government-led funds also bought into old economy heavyweights to provide more support to the market," Huang said.

Among them, China Steel Corp., the largest steel maker in Taiwan, rose 0.35 percent to close at NT$28.45, off a low of NT$27.50, while Formosa Plastics Corp. fell 0.35 percent to end at NT$85.90 but came off a low of NT$85.10.

The shipping industry also came under pressure, amid falling global demand, with Evergreen Marine Corp., the largest container cargo shipper in Taiwan, closing down 0.31 percent at NT$156.00 and rival Yang Ming Marine Transport Corp. falling 3.48 percent to end at NT$66.50.

The tourism sector, meanwhile, ended up 2.35 percent, boosted by government plans to ease border controls.

My Humble House soared by the daily maximum 10 percent to close at NT$30.30, FDC International Hotels Corp. surged 7.77 percent to end at NT$50.60, Formosa International Hotels Corp. gained 6.13 percent to finish at NT$190.50, and Lion Travel Service Co. ended 2.49 percent higher at NT$103.00.

In the financial sector, Fubon Financial Holding Co. also got a boost from bargain hunters, rising 1.12 percent to close at NT$54.40, although the entire sector lost 1.08 percent.

"I think worry over another big rate hike by the Fed will continue to bother market sentiment," Huang said. "But government-led funds may help keep the Taiex above 13,928 points, which was the intraday low on July 12."

After the Taiex plunged 2.72 percent on July 12, the Taiwan government authorized intervention of the National Stabilization Fund, which has a purse of NT$500 billion and was set up in 2000 to serve as a buffer against unexpected external factors that might disrupt the local bourse.

(By Frances Huang)

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