Taiwan shares end sharply up on U.S. rally

Taipei, Aug. 14 (CNA) Shares in Taiwan closed sharply higher by about 230 points Wednesday as buying was sparked by a rally on the U.S. markets overnight in the wake of the softer-than-expected July producer price index (PPI) growth, which reinforced hopes of a rate cut by the Federal Reserve, dealers said.

Interest was seen among large-cap stocks across the board amid improved sentiment, but gains were capped by stiff technical resistance ahead of the 20-day moving average of 22,084 points by the end of the session, dealers added.

The Taiex, the benchmark weighted index on the Taiwan Stock Exchange (TWSE), ended up 230.68 points, or 1.06 percent, at 22,027.25 after moving between 21,942.22 and 22,155.29. Turnover totaled NT$409.49 billion (US$12.69 billion).

The market opened up 0.71 percent and momentum continued to send the Taiex to the day's high, rising about 360 points at one point as investors were encouraged by the gains on the U.S. markets, where the Dow Jones Industrial Average rose 1.04 percent and the tech-heavy Nasdaq index gained 2.43 percent after the July PPI rose 0.1 percent from June, compared with a market estimate of 0.2 percent, dealers said.

However, with the Taiex briefly breaching 22,100 points with tech heavyweights such as iPhone assembler Hon Hai Precision Industry Co. in focus, some profit-taking emerged to force the broader market to give up part of its initial gains by the end of the session, dealers added.

"The latest PPI data is encouraging, making more and more investors at home and abroad more confident that the Fed will start a rate cut cycle in September," Mega International Investment Services Corp. analyst Alex Huang said, referring to the latest gains both in the U.S. and Taiwan.

"However, technically speaking, the Taiex saw high technical hurdles ahead of the 20-day moving average after a recent strong rebound," Huang said. "Turnover stayed moderate, indicating many investors appeared reluctant to chase prices for the moment."

Before Wednesday, the main board had rebounded by 1,833.83 points, or 9.19 percent from an intraday low of 19,962.74 on Aug. 6 amid global volatility.

Huang said Hon Hai, also known as Foxconn on global markets, led the bellwether electronics sector and the main board to move ahead after rising 2.49 percent to close at NT$185.50 after a 2.84 percent increase on Tuesday.

"The stock started to attract strong buying yesterday and strength continued today before an investor conference slated to open after the market closed today," Huang said. "Investors have high hopes that Hon Hai will give positive leads in the current boom of artificial intelligence development."

Second to contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) in terms of market value, Hon Hai has forecast its AI server sales will grow more than 40 percent from a year earlier in 2024.

Among other AI-related stocks after a 6.53 percent increase posted by U.S.-based AI chip designer Nvidia Corp. overnight, AI server maker Quanta Computer Inc. rose 1.69 percent to close at NT$271.00, and rival Wistron Corp. gained 1.47 percent to end at NT$103.50.

In addition, PC brand Asustek Computer Inc., which has launched AI PCs, gained 2.00 percent to close at NT$510.00, and Giga-Byte Technology Co., a leading graphics card vendor for AI applications, ended up 2.75 percent at NT$242.50.

While shares of TSMC, which is said to serve as the sole supplier to Nvidia, were outshined by Hon Hai due to its relatively high valuation, the chipmaker still traded above the previous closing throughout the session, up 0.74 percent to end at NT$948.00. The stock came off a high of NT$955.00.

Despite the limited upturn of TSMC, other semiconductor heavyweights were still sitting on strong buying interest with IC packaging and testing services provider ASE Technology Holding Co. up 4.70 percent to close at NT$156.00, and smartphone IC designer MediaTek Inc. up 2.16 percent to end at NT$1,185.00.

"After the U.S. July PPI data, market sentiment has turned upbeat so buying not only boosted tech stocks but also old economy stocks, in the raw material industries, in particular," Huang said.

In the steel industry, which rose 1.67 percent, China Steel Corp., the largest steel maker in Taiwan, rose 2.71 percent to close at NT$22.70, Chung Hung Steel Corp. gained 2.40 percent to end at NT$19.20, and Tung Ho Steel Corp. added 1.55 percent to close at NT$78.60.

In addition, petrochemical stocks were boosted by a spike in international crude oil prices, with Nan Ya Plastics Corp. rising 3.27 percent to end at NT$47.35, and Formosa Plastics Corp. gaining 1.14 percent to close at NT$53.40. Oil price-sensitive textile brand Far Eastern New Century Corp. rose 1.97 percent to end at NT$36.20.

The construction index rose 2.28 percent on hopes that property developers would book large sales in the second half of this year, dealers said. Huang Hsiang Construction Corp. soared 10 percent, the maximum daily increase, to close at NT$65.30, Kuo Yang Construction Co. rose 3.91 percent to end at NT$26.55, and Cathay Real Estate Development Co. closed up 3.47 percent at NT$28.30.

In the financial sector, which rose 1.28 percent, Fubon Financial Holding Co. gained 2.06 percent to end at NT$89.30, E. Sun Financial Holding Co. added 1.68 percent to close at NT$27.25, and Cathay Financial Holding Co. ended up 0.98 percent at NT$61.90.

"Washington will release the July consumer price index later today and it is also worth watching for investors to guess how the Fed will engineer its rate cut cycle," Huang said. "The U.S. retail sales data will be due Thursday as a barometer to how the U.S. economy will evolve, which is expected to dictate market movement."

According to the TWSE, foreign institutional investors bought a net NT$24.899 billion worth of shares on the main board Wednesday.