Taiwan shares end sharply down as TSMC dives after Trump's remarks

Taipei, July 17 (CNA) Shares in Taiwan moved sharply lower by more than 200 points Wednesday with contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) taking a beating after U.S. Republican presidential candidate Donald Trump said Taiwan "did take 100 percent of our chip business," dealers said.

As Trump has seen his odds growing to win the election in November, there are rising fears that TSMC's global expansion will be affected after the former U.S. President returns to the White House, dealers added.

The Taiex, the Taiwan Stock Exchange's (TWSE) weighted index, ended down 227.43 points, or 0.95 percent, at 23,769.82 after moving between 23,650.94 and 23,993.68. Turnover totaled NT$542.36 billion (US$16.64 billion).

The market opened down 169.98 points, or 0.71 percent, with TSMC in focus as investors took cues from the losses suffered by futures of the chipmaker's American depositary receipts (ADRs), which tumbled about 1.8 percent at one point overnight after Trump's comments, dealers said.

TSMC's weakness led the bellwether electronics sector to trend lower throughout the session, while select old economy stocks, the petrochemical industry, in particular, attracted buying to offset the impact resulting from the tech sector by the end of the session, dealers added.

TSMC, the most heavily weighted stock in the local market, shed 2.37 percent to close at NT$1,030.00. Its losses contributed about 200 points to Taiex's fall and pushed down the electronics index and the semiconductor sub-index by 1.47 percent and 1.95 percent, respectively.

Trump interview

"As Trump is gaining his upper hand in the U.S. presidential campaigns, there are rumors that when he takes office, TSMC's subsidies for its investments will be canceled," Moore Securities Investment Consulting analyst Adam Lin said."His latest comments simply raised such concerns."

In an interview with Bloomberg Businessweek on June 25 but published overnight, Trump said Taiwan should pay the United States for its defense.

"I know the people very well and respect them greatly. They did take about 100 percent of our chip business. I think Taiwan should pay us for defense," Trump said.

TSMC is investing US$65 billion to build three advanced wafer fabs in the U.S. state of Arizona. The chipmaker has signed a nonbinding preliminary memorandum of terms (PMT) with the U.S. Department of Commerce for direct funding of up to US$6.6 billion under the CHIPS and Science Act.

Lin said the sell-off in TSMC also came as foreign institutional investors sold the stock in the spot market on the futures settlement date of Wednesday for profit in futures as they had held large short position contracts on the stock for hedging purposes.

"After TSMC shares posted significant gains recently, investors just seized Trump's interview to take profits," Lin said. "But, the stock still traded above the NT$1,000 threshold amid optimism that the company will give positive leads in an investor conference (slated to open Thursday) in a boom of artificial intelligence development."

July 17: Taiwan willing to do more for self-defense: Premier Cho

While TSMC came under heavy pressure, other semiconductor heavyweights appeared resilient with IC packaging and testing services provider ASE Technology Holding Co. up 1.96 percent to end at NT$182.50, and United Microelectronics Corp., a smaller contract chipmaker, closing unchanged at NT$53.00.

In addition, iPhone assembler Hon Hai Precision Industry Co., second to TSMC in terms of market value, lost only 0.47 percent to end at NT$212.00.

Also in the electronics sector, AI server maker Quanta Computer Inc. lost 2.64 percent to close at NT$314.00, and Giga-Byte Technology Co., a leading graphics card vendor for AI applications, fell 3.14 percent to end at NT$293.00.

Old economy industries

"The silver lining was that the four major petrochemical stocks under the conglomerate Formosa Plastics Group attracted rotational buying in the wake of their relatively low valuations," Lin said. "Due to their large weighting, their gains prevented the Taiex from falling further."

With the petrochemical index up 3.47 percent, Formosa Plastics Corp. surged 5.04 percent to close at NT$60.10, Nan Ya Plastics Corp. gained 4.56 percent to end at NT$50.40, Formosa Chemicals & Fibre Corp. rose 2.79 percent to close at NT$49.75, and Formosa Petrochemical Corp. ended up 1.41 percent at NT$64.90.

Dealers said the construction industry also outperformed the broader market, rising 1.28 percent on hopes that the industry will book large sales in the second half of this year.

Huaku Development Co. surged 8.33 percent to close at NT$169.00, and Chong Hong Construction Co. rose 3.14 percent to end at NT$131.50. In addition, Cathay Real Estate Development Co. gained 2.58 percent to close at NT$31.85 and Goldsun Building Materials Co. added 2.24 percent to end at NT$48.00.

Financial sector

In the financial sector, which also appeared resilient, down only 0.47 percent, Yuanta Financial Holding Co. rose 0.45 percent to close at NT$33.15, while Fubon Financial Holding Co. ended down 0.76 percent at NT$91.00.

"Investors here should keep alert over how the U.S. markets open tonight about whether TSMC's ADRs will move lower like its futures," Lin said.

"More importantly, TSMC's investor conference is expected to dictate the local main board. Please watch closely what the chipmaker will say in the meeting," Lin said.

According to the TWSE, foreign institutional investors sold a net NT$30.72 billion worth of shares on the main board Wednesday.