Taiwan shares end in continued rally after U.S. gains

Taipei, Aug. 12 (CNA) Shares in Taiwan closed sharply higher, rising more than 300 points in a continued comeback Monday as the U.S. markets showed signs of stabilizing from a recent sell-off amid eased concerns over a possible recession in the United States, dealers said.

The bellwether electronics sector served as a driver to the upturn on the local main board as buying focused on artificial intelligence server stocks throughout the session, dealers added.

The Taiex, the benchmark weighted index on the Taiwan Stock Exchange (TWSE), ended up 304.26 points, or 1.42 percent, at 21,773.26 after moving between 21,598.93 and 21,897.98. Turnover totaled NT$382.47 billion (US$11.78 billion). Monday's rally extended from a 2.87 percent rise on Friday.

The market opened up 0.61 percent as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) led the upturn as investors took cues from a 1.56 percent spike in its American depositary receipts (ADRs) on Friday in the wake of the gains on the U.S. markets, where the tech-heavy Nasdaq index rose 0.51 percent at the end of last week, dealers said.

With the Taiex moving closer to 22,000 points, some investors shifted to the sell side to cap gains for TSMC, while buying accelerated among AI server stocks, including Hon Hai Precision Industry Co., to lend support to the broader market by the end of the session, dealers added.

TSMC, the most heavily weighted stock in the local market, rose 0.64 percent to close at NT$940.00 after coming off a high of NT$948.00.

"After bouncing back in the past few sessions, TSMC had left many tech stocks behind," Hua Nan Securities analyst Kevin Su said. "At a time when the local market followed its American counterparts to turn stable, other tech stocks simply played catch up, and today, AI server makers were under the spotlight to maintain the strength of the electronics sector as well as the main board."

The electronics index rose 1.56 percent, while the computer and peripheral subindex, which includes many AI-related heavyweights, gained 3.28 percent.

Among the AI server stocks, iPhone assembler Hon Hai Precision Industry Co., second to TSMC in terms of market value, rose 4.45 percent to end at NT$176.00, and Quanta Computer Inc., another major AI server maker, gained 6.80 percent to close at NT$267.00.

In addition, Wistron Corp., also an AI server supplier, grew 5.34 percent to end at NT$102.50, and Wistron's cloud application subsidiary Wiwynn Corp. added 4.80 percent to close at NT$1,965.00.

"Hon Hai was trading at a price-to-earnings multiple of only 16, and Quanta at around 20, and they appeared much cheaper than TSMC, which were traded at around a 28 PE multiple," Su said. "Bargain hunters, therefore, just placed more bets on these AI server stocks today."

While TSMC gave up part of its initial gains, other semiconductor stocks continued their strong showing with smartphone IC designer MediaTek Inc. up 4.44 percent to end at NT$1,175.00, IC packaging and testing services provider ASE Technology Holding Co. up 2.06 percent to close at NT$148.50, and United Microelectronics Corp., a smaller contract chipmaker, up 1.48 percent to end at NT$54.70.

Also in the electronics sector, power management solution provider Delta Electronics Inc. gained 2.97 percent to close at NT$399.00, while Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., bucked the upturn, falling 0.18 percent to end at NT$2,750.00.

"Bargain hunting interest also spread to old economy industries," Su said. "Today, buying focuses on electric machinery, shipping and construction stocks."

In the electric machinery industry, which rose 2.74 percent on the back of the government's massive investments to strengthen electricity grid networks around Taiwan, Fortune Electric Co. soared 8.70 percent to close at NT$687.00, and Allies Electric Co. gained 7.23 percent to end at NT$133.50. In addition, Shihlin Electric & Engineering Corp. rose 4.60 percent to close at NT$277.50.

The transportation index rose 3.30 percent on growing freight rates with Evergreen Marine Corp., the largest container cargo shipper in Taiwan, rising 4.05 percent to end at NT$180.00, and rivals Yang Ming Marine Transport Corp. and Wan Hai Lines Ltd. rising 4.44 percent and 6.87 percent, respectively, to close at NT$63.50 and NT$82.50.

In the construction industry, which gained 2.01 percent on home transaction growth, Kindom Development Co. surged 10 percent, the maximum daily increase, to end at NT$58.60, and JSL Construction & Development Co. rose 5.56 percent to close at NT$190.00.

The financial sector added 0.79 percent, with Fubon Financial Holding Co. up 0.93 percent to end at NT$86.80, and Cathay Financial Holding Co. up 0.83 percent to close at NT$61.00. However, CTBC Financial Holding Co. ended down 0.58 percent at NT$34.50.

"As the U.S. Federal Reserve is likely to start a rate cut cycle in September, liquidity is expected to rise, accordingly, so I expect technical support for the Taiex will be seen ahead of 21,000 points if any technical pullback takes place," Su said. "In other words, downside risks will be limited."

According to the TWSE, foreign institutional investors bought a net NT$19.15 billion worth of shares on the main board Monday.