Taiwan shares extend momentum on another U.S. surge

10/05/2022 05:33 PM
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CNA photo Oct. 5, 2022
CNA photo Oct. 5, 2022

Taipei, Oct. 5 (CNA) Shares in Taiwan extended their strength from a session earlier by rising 220 points Wednesday, as investors took their cue from another surge on U.S. markets overnight, dealers said.

As market sentiment improved amid eased fears over aggressive U.S. Federal Reserve rate rises, buying on the local main board featured top stocks in terms of market capitalization, in particular in the bellwether electronics sector, pushing up share prices sharply across the board, they said.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended up 224.91 points, or 1.66 percent, at 13,801.43 after moving between 13,727.30 and 13,902.02. Turnover totaled NT$232.52 billion (US$7.38 billion).

Wall Street rallies

The market opened up 1.11 percent on follow through buying from Tuesday, when the Taiex rose 2.08 percent, a response to a rally on U.S. markets, where the Dow Jones Industrial Average grew 2.80 percent and the tech-heavy Nasdaq index gained 3.34 percent overnight on hopes the Fed will adopt a more dovish approach in its rate hike cycle after disappointing Institute for Supply Management (ISM)'s Purchasing Managers' Index (PMI) data for September, dealers said.

Large cap tech stocks led by contract chipmaker Taiwan Semiconductor Manufacturing (TSMC) steamed ahead to boost the electronics sector and semiconductor sub-index by 2.50 percent and 3.27 percent, respectively, serving as an anchor to the upturn on the Taiex by the end of the session, they said.

"The U.S. benchmark 10-year treasury yield and the U.S. dollar index fell overnight, indicating investors are betting on the Fed taking a softer position after the latest manufacturing activity data," Mega International Investment Services Corp. analyst Alex Huang said.

The latest U.S. manufacturing activity rose at its slowest pace in almost 2.5 years in September.

"Moreover, a surprise move by the Reserve Bank of Australia raising interest rates by only 25 basis points (Tuesday) instead of 50 basis points previously anticipated by the market further raised expectations that the Fed will also slow its rate hike pace," Huang said.

With the fall in the U.S. dollar index, which traces the currencies of Washington's major trading partners, the greenback continued a downtrend against the Taiwan dollar on the Taipei forex Wednesday.

TSMC, tech stocks

"I suspect foreign institutional investors continued to seek out bargains among tech heavyweights which have been hit by the weakness of the Taiwan dollar on fund flight out of the country," Huang said. "TSMC, again, played a critical role today."

According to the TWSE, foreign institutional investors bought a net NT$4.99 billion worth of shares on the main board Wednesday.

In the wake of a 5.14 percent rise in its American depositary receipts (ADRs) overnight, TSMC, the most heavily weighted stock on the local market, rose 3.73 percent to close at NT$445.00 and its gains contributed about 130 points to the Taiex's rise in the session.

Second to TSMC in terms of market cap, iPhone assembler Hon Hai Precision Industry Co. gained 4.39 percent to end at NT$107.00. This came after the company reported a new high of NT$822.32 billion in consolidated sales in September, up 83.18 percent from a month earlier and also up 40.39 percent from a year earlier, due to the popularity of the iPhone 14 Pro and iPhone 14 Pro Max, which went on global sale last month.

In addition, smartphone IC designer MediaTek Inc., the third largest stock in terms of market cap, gained 4.54 percent to close at NT$599.00, power management solution provider Delta Electronics Inc. rose 4.26 percent to end at NT$269.50, Yageo Corp., the world's third largest multilayer ceramic capacitor (MLCC) maker, added 3.48 percent to close at NT$297.50, and IC packaging and testing services provider ASE Technology Holding Co. ended up 2.63 percent at NT$81.90.

Old economy stocks

As the market spotlight remained on the tech sector, old economy stocks were relatively quiet throughout the session in terms of gains, Huang said.

Among them, China Steel Corp., the largest steel maker in Taiwan, rose 1.47 percent to close at NT$27.60, and Tung Ho Steel Enterprise Corp. added 0.56 percent to end at NT$53.50. Food brand Uni-President Enterprises Corp. gained 0.91 percent to close at NT$66.30, while rival Wei Chuan Foods Corp. ended unchanged at NT$19.60.

Airline stocks were mixed, with China Airlines up 0.51 percent to close at NT$19.85 and EVA Airways down 0.18 percent to end at NT$27.85.

The financial sector rose 0.91 percent as the Financial Supervisory Commission is expected to allow life insurance companies to recategorize their assets in a bid to prevent negative net worth resulting from their losses on overseas investments amid global financial volatility.

Shares in Cathay Financial Holding Co. and Fubon Financial Holding Co., which own large life insurance operations, rose 3.03 percent and 2.33 percent, respectively, to close at NT$40.75 and NT$50.60, while E. Sun Financial Holding Co. lost 0.20 percent to end at NT$25.25.

"Despite today's gains, the Taiex failed to overcome stiff technical resistance ahead of 13,928 points, an interday low seen on July 12, and still face high technical hurdles at around the 20-day moving average of 14,154 points," Huang said.

"U.S. markets are expected to continue to influence the Taiex as it is possible the Dow will take a pause and go into consolidation after surging more than 1,500 points in the past two sessions," Huang added.

(By Frances Huang)

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