Taiwan shares end sharply higher after U.S. rally

Taipei, Aug. 1 (CNA) Shares in Taiwan moved sharply higher Thursday, led by tech heavyweights, after the U.S. markets enjoyed strong gains overnight following a strong earnings report.

Buying was also triggered by growing hopes of a rate cut by the Federal Reserve as early as September after U.S. Federal Reserve Chair Jerome Powell made dovish comments on the central bank's monetary policy at a time when inflation showed signs of moderating.

The Taiex, the benchmark weighted index on the Taiwan Stock Exchange (TWSE), ended up 442.75 points, or 1.99 percent, at 22,642.10 after moving between 22,465.06 and 22,652.21. Turnover totaled NT$430.77 billion (US$13.17 billion).

The market opened up 1.56 percent, led by electronic heavyweights, which helped push the Taiex over the 60-day moving average of around 22,300 points. This was a knee-jerk reaction to a 2.64 percent increase in the tech-heavy Nasdaq index and a 7.01 percent surge in the Philadelphia Semiconductor Index, according to dealers.

Contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) sustained its strength along with the gains posted by other large-cap tech stocks. This helped push the market over the next technical resistance ahead of 22,600 points by the end of the session.

"Today's momentum came as TSMC and other semiconductor stocks followed (U.S.-based artificial intelligence chip designers) Nvidia Corp. and Advanced Micro Devices, Inc. (AMD) in moving higher following AMD's better-than-expected earnings," Cathay Futures Consultant analyst Tsai Ming-han said.

After AMD's results, the stock rose 4.36 percent and Nvidia by 12.81 percent overnight.

"The U.S. market gains showed tech stocks there reacted positively to AMD's earnings," Tsai noted.

After its American depositary receipts soared 7.29 percent overnight, TSMC, the most heavily weighted stock in the local market, rose 2.78 percent to close at NT$960.00. The stock's gains contributed about 210 points to the Taiex rise, sending the electronics index and semiconductor sub-index higher by 2.44 percent and 2.32 percent, respectively.

TSMC's buying was also seen among other semiconductor stocks. United Microelectronics Corp., a smaller contract chipmaker, was up 6.94 percent to end at NT$53.90, and IC packaging and testing services provider ASE Technology Holding Co. was up 2.33 percent to close at NT$153.50.

Bucking the upturn, smartphone IC designer MediaTek Inc. lost 3.28 percent to end at NT$1,180.00. Dealers attributed this to investors being wary of weaker-than-expected smartphone demand in the third quarter.

"The buying in the tech sector also came after Powell struck a dovish tone overnight following the Fed policymaking meeting," Tsai said. Powell said if inflation keeps easing, a rate cut in September "could be on the table."

"It seemed that more and more investors at home and abroad were willing to take risks by picking up rate-sensitive tech stocks," Tsai said.

Also boosted by Nvidia's strong showing, AI server maker Quanta Computer Inc. rose 6.06 percent to close at NT$289.00, and LITE-ON Technology Corp., a maker of power management solutions for AI server use, was up 10 percent, the maximum daily increase, to end at NT$109.00.

In addition, iPhone assembler Hon Hai Precision Industry Co., which also rolls out AI servers, gained 2.27 percent to close at NT$202.50. Hon Hai is second to TSMC in terms of market value.

Tech buying spread to old economy industries with the construction industry rising 3.16 percent following hopes property developers will log large sales in the second half of this year.

Among the gaining property developers, King's Town Construction Co. surged 10 percent to close at NT$113.50, and Chong Hong Construction Co. rose 8.06 percent to end at NT$147.50.

Elsewhere in the old economy sector, textile brand Far Eastern New Century Corp. rose 3.38 percent to close at NT$35.15, while food brand Uni-President Enterprises Corp. lost 1.24 percent to end at NT$79.90.

In the financial sector, which rose 0.61 percent, CTBC Financial Holding Co. gained 1.13 percent to close at NT$35.90, and Cathay Financial Holding Co. added 0.64 percent to end at NT$62.80. Fubon Financial Holding Co. also closed unchanged at NT$88.20.

"Apple will report its earnings later in the day and the data will serve as a barometer to tech stocks in the United States and Taiwan," Tsai said.

"Moreover, Washington is scheduled to release its June job data Friday. It is also worth keeping an eye out for more clues regarding the Fed's stance," Tsai added.

According to the TWSE, foreign institutional investors bought a net NT$16.36 billion shares on the main board Thursday.