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Taiwan shares tumble following Fed's hawkish comments after meeting

09/21/2023 06:00 PM
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CNA file photo
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Taipei, Sept. 21 (CNA) Shares in Taiwan took a beating Thursday with investors stunned by hawkish comments made by the U.S. Federal Reserve after the conclusion of its policymaking meeting overnight, dealers said.

The bellwether electronics sector led the downturn in the wake of heavy losses suffered by tech stocks on U.S. markets as a spike in U.S. treasury yields made the interest rate sensitive stocks less attractive, dealers added.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 218.08 points, or 1.32 percent, at 16,316.67 after moving between 16,300.54 and 16,475.42. Turnover totaled NT$277.24 billion (US$8.63 billion).

The market opened down 0.36 percent and selling soon escalated with large cap tech stocks in focus as investors took their cue from a 1.53 percent decline on the tech-heavy Nasdaq index and a 1.74 percent fall on Philadelphia Semiconductor Index after the Fed's statement, dealers said.

The weakness on the local main board continued as selling spread to financial and old economy stocks, pushing the Taiex below the nearest technical support at around the 120-day moving average of 16,500 points to end below the 16,400 point mark, dealers added.

While the Fed held its key interest rates steady at the meeting, Fed Chair Jerome Powell said the American central bank was "prepared to raise rates further if appropriate, and we intend to hold policy at a restrictive level until we're confident that inflation is moving down sustainably toward our objective."

The Fed's dot plot, a chart updated quarterly that records each Fed official's projection for the central bank's key short-term interest rate, indicated that the officials have forecast fewer rate cuts next year than previously expected as it keeps rates higher for longer to stamp out inflation.

"The Fed's statement struck a nerve with investors at home and abroad," Mega International Investment Services Corp. analyst Alex Huang said. "In Taipei, the sell-off in large cap electronics stocks was simply sparked by the U.S. losses."

The electronics sector fell 1.29 percent with the semiconductor sub-index falling 1.47 percent, led by contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock on the local market, which lost 1.50 percent to close at NT$527.00 as tech stocks lost their luster amid rising interest rates.

"Today, TSMC failed to remain above NT$534, the intraday low on Aug. 21, paving the path for further losses down the road," Huang said. "The stock is likely to test NT$521, the next support level, soon."

In addition, high interest rates on U.S. markets led to a stronger greenback so foreign institutional investors moved more funds out of the region for U.S. dollar denominating assets, Huang said.

"In addition to TSMC, other tech heavyweights were hit hard by foreign fund outflows, placing more downward pressure on the broader market throughout the session," Huang added.

Shares in iPhone assembler Hon Hai Precision Industry Co., also known as Foxconn globally, which is second to TSMC in terms of market value, dropped 0.94 percent to end at NT$105.00, and smartphone IC designer MediaTek Inc., which ranks No. 3 in market value, shed 1.71 percent to close at NT$746.00.

Among other big tech stocks, power management solutions supplier Delta Electronics Inc. lost 1.66 percent to end at NT$325.00, and IC packaging and testing services provider ASE Technology Holding Co. fell 2.18 percent to close at NT$112.00, while Chunghwa Telecom Co. appeared resilient, falling only 0.43 percent to end at NT$116.50 as the stock is perceived as a safe haven amid market volatility.

Bucking the downturn, select stocks related to artificial intelligence development benefited from bargain hunting after recent heavy losses, Huang said. AI server maker Quanta Computer Inc. rose 0.23 percent to close at NT$219.00, and rival Wistron Corp. gained 1.82 percent to end at NT$100.50.

"Falling bond prices on the U.S. market prompted investors to think that the value of financial firms' overseas investments will continue to diminish so the financial sector was also the victim of the rising U.S. treasury yields due to the aggressive Fed, Huang said.

The financial sector lost 1.43 percent with CTBC Financial Holding Co. down 2.01 percent to close at NT$24.35, and Mega Financial Holding Co. down 1.19 percent to end at NT$37.40. In addition, Cathay Financial Holding Co. shed 1.75 percent to close at NT$44.90, and Fubon Financial Holding Co. fell 1.13 percent to end at NT$61.40.

In the old economy sector, where many large cap stocks also moved sharply lower in line with the Taiex, Nan Ya Plastics Corp. lost 2.05 percent to close at NT$67.00, and Formosa Plastics Corp. fell 1.46 percent to end at NT$81.20.

Elsewhere in the sector, textile brand Far Eastern New Century Corp. dropped 1.37 percent to close at NT$28.80, and China Steel Corp., the largest steel maker in Taiwan, shed 1.32 percent to end at NT$26.15.

"Judging from today's limited turnover, many investors were reluctant to buy on the dip as they expect more losses to come with further foreign fund outflows likely," Huang said. "So, there are no signs the Taiex's current downturn will end any time soon."

According to the TWSE, foreign institutional investors sold a net NT$33.98 billion worth of shares on the local main board Thursday.

(By Frances Huang)


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