Taiwan shares end on new high but TSMC trends lower

Taipei, Feb. 29 (CNA) Shares in Taiwan closed at a new high Thursday, despite contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) coming under pressure, dealers said.

Buying on the broader market largely came before MSCI Inc.'s quarterly index adjustments went into effect after Thursday's market close. However, TSMC bucked the upturn and fell 0.94 percent due to the stock's American depositary receipts (ADRs) overnight, dealers added.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended up 112.36 points, or 0.60 percent, at 18,966.77 after moving between 18,794.62 and 19,019.69. Turnover totaled NT$416.86 billion (US$13.19 billion).

The market opened down 0.31 percent and moved to the day's low in the early morning session, largely due to TSMC, as investors took cues from the losses suffered by tech stocks on the U.S. markets on Wednesday -- the tech-heavy Nasdaq index fell 0.55 percent and the Philadelphia Semiconductor Index lost 1.12 percent -- ahead of the release of the U.S. January Personal Consumption Expenditures Price (PCE) Index later Thursday, dealers said.

Buying switched to non-tech stocks, particularly in the financial sector, which propelled the Taiex into positive territory for the rest of the session, following MSCI's decision to raise Taiwan's weighting in two of its major indexes in its latest quarterly index review, dealers added.

Thursday's closing level beat the previous closing high of 18,948.05 recorded on Monday.

"MSCI's quarterly index review has prompted foreign passive mutual funds to switch up their buying, which increased turnover," Concord Capital Management analyst Lu Chin-wei said. "The buying largely focused on large non-tech stocks as investors cut their TSMC holdings by pocketing the strong gains."

According to the TWSE, foreign institutional investors bought a net NT$3.14 billion worth of shares on the main board Thursday.

On Feb. 13 Taipei time, MSCI announced it had upgraded Taiwan's weighting in the MSCI Emerging Markets Index by 0.01 percentage points to 15.97 percent.

The index provider said it had also raised Taiwan's weighting in the MSCI All-Country Asia ex-Japan Index by 0.05 percentage points to 18.75 percent and left the country's weighting in the MSCI All-Country World Index at 1.60 percent.

The financial sector got a strong boost from the quarterly index review, rising 1.16 percent, Lu said. "Investors used the MSCI move to take advantage of the financial sector's relatively low valuation compared with its electronics counterpart," he said.

Among the rising financial stocks, Cathay Financial Holding Co. rose 1.69 percent to close at NT$45.05, and Fubon Financial Holding Co. gained 1.64 percent to end at NT$68.00. In addition, CTBC Financial Holding Co. added 1.38 percent to close at NT$29.40, and Mega Financial Holding Co. ended up 1.31 percent at NT$38.70.

Large old economy stocks also rode the waves of MSCI's weighting adjustments and attracted rotational buying with textile maker Far Eastern New Century Corp. up 3.00 percent to close at NT$32.60, and food brand Uni-President Enterprises Corp. up 1.86 percent to end at NT$76.70. Meanwhile, Nan Ya Plastics Corp. grew 1.36 percent to close at NT$59.70, and Formosa Chemicals & Fibre Corp. gained 1.96 percent to end at NT$57.20.

The electric machinery index trended higher by 4.56 percent, with the value of many stocks increasing on the back of a government policy to strengthen the resilience of Taiwan Power Co.'s power grids nationwide, Lu said.

Among them, Chung-Hsin Electric & Machinery Manufacturing Corp. and Allis Electric Co. soared 10 percent, the maximum daily increase, to close at NT$171.00 and NT$100.00, respectively. In addition, Shihlin Electric & Engineering Corp. surged 9.04 percent to end at NT$187.00.

"The electronics sector underperformed the broader market due to TSMC's losses," Lu said. "The stock encountered stiff technical resistance ahead of NT$700 and investors used ADR losses as an excuse to cut their holdings, but its fundamentals remain sound."

TSMC lost 1.15 percent to close at NT$690.00 after hitting a high of NT$698.00. TSMC's losses were equivalent to about 65 points of the Taiex losses.

"TSMC's weakness came in line with many U.S. tech stocks overnight amid caution about upcoming PCE data," Lu said. "If the January PCE is higher than expected, fears will heighten that the Fed will push back its rate cut cycle."

While TSMC weakened, other semiconductor stocks benefited from rotational buying with United Microelectronics Corp. (UMC), a smaller contract chipmaker, up 1.45 percent to close at NT$48.85, and smartphone IC designer MediaTek Inc. up 2.24 percent to end at NT$1,140.00.

After MSCI raised its weighting in the MSCI Taiwan Index after the quarterly index review, Global UniChip Corp., TSMC's application-specific integrated circuit (ASIC) design subsidiary, jumped 8.16 percent to close at NT$1,590.00.

"Without a stronger TSMC, it is unlikely that the Taiex will overcome technical hurdles and surpass 19,000 points," Lu said. "Today's PCE data will be critical in testing the U.S. markets and move TSMC's ADRs."