Taiwan shares plunge below 24,000 points, led by tech stocks

Taipei, July 12 (CNA) Shares in Taiwan took a beating Friday, falling more than 470 points, as investors rushed to lock in profits built in recent sessions, even though Washington reported cooler than expected inflation data for June overnight, dealers said.

Selling was sparked with heavy losses suffered by tech stocks on U.S. markets on Thursday, pushing down the local bellwether electronics sector throughout the session, dealers added.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 473.10 points, or 1.94 percent, at 23,916.93 after moving between 23,774.22 and 24,045.73. Turnover totaled NT$578.11 billion (US$17.77 billion).

The market opened flat but selling soon followed and escalated with large cap electronics stocks in focus, in particular contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC).

U.S. June CPI

Investors took their cues from a 1.95 percent fall on the tech-heavy Nasdaq index and a 3.47 percent tumble on the Philadelphia Semiconductor Index on Thursday, despite a 0.1 percent month-on-month fall in the U.S. June consumer price index, dealers said.

Downward pressure on tech heavyweights continued for the rest of the session with select old economy industries supported by rotational buying before some bargain hunters jumped into the late trading session, helping the broader market recoup part of the initial downturn, dealers added.

"The local electronics industry just followed U.S. tech stocks to trend sharply lower as the tech sector at home and abroad has been overvalued after a recent strong showing," Mega International Investment Services Corp. analyst Alex Huang said.

Before Friday, the Taiex had soared about 36 percent since the beginning of the year, with TSMC, the most heavily weighted stock on the local market rising more than 82 percent and serving as a major driver to the upturn on the main board during the same time.

"Although the cooling inflation data in the U.S. reinforced investors' belief that the U.S. Federal Reserve will kick off a rate cut cycle as early as September, such expectations had been priced in and investors just sold on the news," Huang said.

TSMC, Hon Hai

"In addition, TSMC was the major target many investors wanted to dump to pocket profits," Huang said.

After a 3.47 percent fall in its American depositary receipts (ADRs) overnight, and a 5.57 percent decline in U.S.-based artificial intelligence chip designer Nvidia Corp., TSMC lost 3.70 percent to close at NT$1,040.00 after coming off a low of NT$1,025.00.

The stock hit a historic high of NT$1,080.00 on Thursday, vaulting the Taiex to a record closing high.

On Friday, TSMC's losses contributed about 330 points to the Taiex's fall and sent the electronics index and semiconductor sub-index lower by 2.89 percent and 3.58 percent, respectively.

iPhone assembler Hon Hai Precision Industry Co., second to TSMC in terms of market value, fell 4.21 percent to end at NT$216.00 after coming off a low of NT$214.00.

Before Friday, shares in Hon Hai, also known as Foxconn on global markets, had surged 116 percent since the beginning of this year, making the stock another target for investors to take profits, Huang said.

TSMC's selling was also seen among other semiconductor stocks with IC packaging and testing services provider ASE Technology Holding Co. down 8.27 percent to close at NT$177.50, and smartphone IC designer MediaTek Inc., the No. 3 in terms of market cap, down 4.23 percent to end at NT$1,360.00.

In addition, Scientech Corp., a TSMC equipment supplier, lost 6.05 percent to close at NT$411.50, and dynamic random access memory (DRAM) chip supplier Nanya Technology Corp. ended down 2.28 percent to end at NT$68.50.

Also in the electronics sector, AI server maker Quanta Computer Inc. lost 1.95 percent to close at NT$326.00, and Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., shed 4.22 percent to end at NT$3,065.00 as investors ignored the company's forecast that its sales growth momentum will grow in July and August.

Old economy sectors

"When funds rotated out of the tech sector, investors sought targets in select old economy industries to park their money today," Huang said. "Raw material stocks in the petrochemical and steel industries benefited from such rotational buying as their relatively low valuations made them look attractive."

After a rebound in international crude oil prices for the second consecutive session on Thursday, the local petrochemical index rose 2.12 percent with Formosa Plastics Corp. up 1.58 percent to close at NT$57.90, and Nan Ya Plastics Corp. up 2.87 percent to end at NT$50.10.

In addition, Formosa Chemicals & Fibre Corp. gained 1.99 percent to close at NT$48.65, and Formosa Petrochemical Corp. ended up 0.47 percent at NT$64.00.

In the crude price sensitive textile industry, which rose 0.54 percent, Makalot Industrial Co. rose 3.66 percent to close at NT$438.50, while Far Eastern New Century Corp. lost 0.53 percent to end at NT$37.80.

In the steel industry, which rose 0.42 percent, Chung Hung Steel Corp. gained 1.17 percent to close at NT$21.60, Tung Ho Steel Corp. added 0.71 percent to end at NT$70.90, and China Steel Corp., the largest steel maker in Taiwan, closed up 0.22 percent at NT$23.10.

"Rotational buying also highlighted financial stocks which have largely reported an improving bottom line on the back of an increase in the asset value of insurance companies from their overseas investments," Huang said.

In the financial sector, which rose 0.29 percent, SinoPac Financial Holding Co. gained 2.07 percent to close at NT$27.10, and Cathay Financial Holding Co. grew 0.31 percent to end at NT$65.70.

Fubon Financial Holding Co. closed down 0.54 percent at NT$91.90, and CTBC Financial Holding ended 0.12 percent lower at NT$28.90.

"The Taiex reached my target of 24,200 points for this year so volatility like today's could continue until the main board sees its strong next technical support ahead of 23,500 points," Huang said.

"U.S. market movements are expected to continue dictating changes on the local index so the current earnings season in the United States will play a big role," Huang added.

According to the TWSE, foreign institutional investors sold a net NT$42.20 billion worth of shares on the main board Friday.