Taiwan shares soar following Fed chair's comments on inflation

Taipei, July 3 (CNA) Share prices in Taiwan rose sharply on Tuesday, surging almost 300 points to end above the 23,100 point mark.

The TAIEX, the weighted index on the Taiwan Stock Exchange (TWSE), rose 293.06 points, or 1.28 percent, reaching the day's high of 23,172.43 after coming off a low of 22,994.28. Turnover totaled NT$496.75 billion (US$15.21 billion).

Buying was sparked by comments about the inflation rate made by U.S. Federal Reserve Chair Jerome Powell on Tuesday, a financial analyst said.

In a speech at a monetary policy conference in Portugal sponsored by the European Central Bank, Powell said the United States has "made quite a bit of progress" to ease inflation.

The Fed chair said the latest inflation reports "do suggest that we are getting back on a disinflationary path", but he reiterated that the Fed will need to see more data before cutting interest rates.

Mega International Investment Services Corp. analyst Alex Huang said that "Powell's remarks were quite encouraging, which bolstered their expectations that the Fed will start a rate cut cycle as early as September."

Taiwan's rate sensitive tech sector followed its counterpart in the United States to rally, with chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) driving the upturn of the broader market, according to the analyst.

The market opened up 0.57 percent in a swift reaction to the gains on the U.S. markets, where the tech-heavy Nasdaq index rose 0.84 percent and the Philadelphia Semiconductor Index gained 1.24 percent Tuesday.

"It is good to see the TAIEX close above 23,100 points after overcoming stiff technical resistance ahead of the five-day moving average of 23,009 points and the 10-day moving average of 23,038 points," Huang said. "That means the local main board has turned technically healthier after recent consolidation."

Tech stocks

TSMC, the most heavily weighted stock in the local market, rose 1.98 percent to close at the day's high of NT$979.00. Its gains contributed about 155 points to the TAIEX's rise and raised the electronics index and the semiconductor sub-index 1.23 percent and 1.77 percent, respectively.

TSMC's buying spread to other semiconductor heavyweights with dynamic random access memory (DRAM) chip supplier Nanya Technology Corp. up 7.91 percent to end at NT$73.70, and TSMC's application specific integrated circuit (ASIC) design subsidiary Global Unichip Corp. up 3.90 percent to close at NT$1,600.00.

In addition, IC packaging and testing services provider ASE Technology Holding Co. added 0.94 percent to end at NT$160.50, while smartphone IC designer MediaTek Inc. lost 0.35 percent to close at NT$1,405.00, and TSMC's equipment supplier Scientech Corp. shed 3.98 percent to end at NT$373.50.

Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co., second only to TSMC in terms of market value, extended losses from an earlier session after going ex-dividend Monday, falling 0.73 percent to close at NT$203.00, while artificial intelligence maker Quanta Computer Inc. rose 0.49 percent to end at NT$308.00.

"Another bright spot on the main board today was that several financial heavyweights made a significant comeback," Huang said. "Those financial stocks which operate large insurance businesses appeared attractive as a boom in the stock and equity markets worldwide has been boosting their asset value."

Financial, old-economy sectors

In the financial sector, which rose 2.83 percent, China Development Financial Holding Co. soared 9.40 percent to close at NT$16.30, Cathay Financial Holding Co. surged 5.67 percent to end at NT$61.50, and Fubon Financial Holding Co. gained 2.84 percent to close at NT$83.30. Meanwhile, Mercuries Life Insurance Co. rose 2.18 percent to end at NT$7.50.

Old economy stocks largely moved higher in line with the broader market during the session.

"Select old economy stocks benefited from their relatively low valuations," Huang said. "After recent consolidation, they simply looked attractive to bargain hunters."

These stocks included Formosa Petrochemical Corp., which rose 1.88 percent to close at NT$65.00, and Eclat Textile Corp. gained 4.93 percent to end at NT$521.00.

In the transportation industry, which rose 0.95 percent, buying continued to feature bulk cargo shipping stocks with Sincere Navigation Corp. rising 2.05 percent to close at NT$32.35, and U-Ming Marine Transport Corp. added 2.35 percent to end at NT$60.90.

Among container cargo shippers, Yang Ming Marine Transport Corp. rose 0.94 percent to close at NT$74.80 percent, and Wan Hai Lines Ltd. ended up 3.30 percent at NT$87.60.

"I expect the TAIEX will move up further on the back of TSMC's uptrend over the next few sessions as investors have embraced high hopes that the chipmaker will give positive leads in the upcoming investor conference slated to open July 18," Huang said.

The analyst said the current strength may lead the TAIEX to challenge the 24,000 point level soon.

According to the TWSE, foreign institutional investors bought shares worth a total of NT$9.27 billion on the main board on Wednesday.