Taiwan shares tumble after Biden quits U.S. presidential race

Taipei, July 22 (CNA) Shares in Taiwan plunged more than 600 points with selling seen among large cap stocks across the board following the news that U.S. President Joe Biden has dropped out of the presidential race, dealers said.

The sell-offs came after many foreign institutional investors scrambled to dump stocks and moved their money out of Taiwan following an increase in the odds of former U.S. President Donald Trump winning the November election, a move that could lead to further geopolitical tensions, according to analysts.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 612.27 points, or 2.68 percent, at 22,256.99 after moving between 22,130.88 and 22,818.86 during the session. Turnover totaled NT$550.07 billion (US$16.73 billion).

The market opened down 0.22 percent on follow-up selling in the previous session in which the Taiex shed 2.26 percent.

Downward pressure soon accelerated with heavyweights in both electronics and non-tech sectors pushing down the broader market to its lowest close since June 12, when the index ended at 22,048.96.

U.S. presidential race

Biden announced overnight that he has decided to drop out of the presidential race and endorse Vice President Kamala Harris to lead the Democratic ticket. But it remained unclear whether Harris will become the party's nominee, according to international news media.

"No matter whether Biden or Harris will compete with Trump, the former U.S. president seemed to have had a bigger chance of winning the race," Moore Securities Investment Consulting analyst Adam Lin said.

"If the U.S. elects Trump, who appears less friendly to Taiwan, geopolitical tensions are expected to grow," Lin said, referring to a recent interview with Bloomberg Businessweek, in which Trump accused Taiwan of taking "about 100 percent" of the chip business from the United States and said Taiwan should pay the U.S. for defense.

Citing the weakness of the Taiwan dollar against the U.S. dollar, Lin said foreign investors sensitive to geopolitical tensions simply dumped their stocks and moved their funds out of the country.

On Monday, the U.S. dollar closed at NT$32.848 against the Taiwan dollar, up NT$0.118 from the previous session, due to a fund flight.

"So, large cap stocks not only in the bellwether electronics sector but also in the old economy and financial sectors came under pressure, sending the Taiex in a tailspin," Lin said.

Tech sector

In the electronics sector, which shed 3.21 percent, chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock in the local market, lost 3.20 percent to close at NT$939.00, the lowest closing level since June 17, when the stock ended at NT$921.00.

TSMC's losses contributed more than 250 points to the Taiex's fall and dragged down the semiconductor sub-index by 3.20 percent on Monday.

In addition, iPhone assembler Hon Hai Precision Industry Co., second only to TSMC in terms of market value, shed 5.64 percent to end at NT$192.50 after local news media reported technical glitches in liquid cooling equipment in AI servers it had rolled out.

TSMC's selling spread to other semiconductor stocks, with IC packaging and testing services provider ASE Technology Holding Co. down 4.09 percent to close at NT$164.00.

United Microelectronics Corp., a smaller contract chipmaker, dropped 3.28 percent to end at NT$50.20, and smartphone IC designer MediaTek Inc. lost 2.78 percent to close at NT$1,225.00.

Bucking the downturn, application specific integrated circuit (ASIC) designer Alchip Technologies Ltd. rose 1.84 percent to end at NT$2,765.00.

Also in the electronics sector, AI server maker Quanta Computer Inc. lost 3.03 percent to close at NT$288.00, and power management solution provider Delta Electronics Inc. plunged 6.39 percent to end at NT$375.50.

Non-tech stocks

"Non-tech stocks largely could not escape a fall in liquidity as foreign institutional investors remitted funds out of Taiwan after trimming their holdings," Lin said.

According to the TWSE, foreign institutional investors sold a net NT$9.20 billion worth of shares on the main board on Monday.

In the financial sector, which lost 1.91 percent, Cathay Financial Holding Co. fell 4.15 percent to close at NT$60.00, and Fubon Financial Holding Co. dropped 4.07 percent to end at NT$82.60.

In addition, CTBC Financial Holding Co. lost 1.25 percent to close at NT$35.50, while Mega Financial Holding Co. ended up 0.47 percent at NT$42.45.

The construction industry experienced relatively heavier selling among the major old economy industries, falling 1.90 percent, with King's Town Construction Co. down 4.26 percent to close at NT$72.00, and Highwealth Construction Corp. down 5.02 percent to end at NT$60.60.

Elsewhere in the old economy sector, China Steel Corp., the largest steel maker in Taiwan, lost 1.07 percent to close at NT$23.10, and Chung Hung Steel Corp. dropped 2.31 percent to end at NT$21.10.

Eclat Textile Co. fell 2.19 percent to close at NT$536.00, and rival Makalot Industrial Co. slid 6.01 percent to end at NT$438.00, while Formosa Plastics Corp. appeared resilient, rising 0.17 percent to close at NT$60.20.

Looking ahead

"Judging from today's movement, I think the Taiex had technical support ahead of the 60-day moving average of 22,139 points," Lin said. "Investors should keep a close eye on whether the index will be able to sustain itself above that level to pave a way to a technical rebound."

"But, I have to say recent heavy selling has provided good buying opportunities for investors who emphasize long term investments," Lin said.

Before Monday's losses, the Taiex fell 1,047.67 points or 4.39 percent last week.