Taiwan shares edge up ahead of futures settlement

Taipei, Aug. 20 (CNA) Shares in Taiwan came off earlier highs to close slightly higher Tuesday amid caution ahead of the settlement of August futures contracts slated for Wednesday at a time when foreign institutional investors still held more short position contracts than long position ones in the futures market, dealers said.

Profit-taking emerged to cap the gains on the main board also because the benchmark index briefly breached the 60-day moving average of around 22,435 points and faced stiff technical resistance, dealers added.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended up 19.47 points, or 0.09 percent, at 22,429.10 after moving between 22,369.25 and 22,545.89. Turnover totaled NT$350.79 billion (US$10.99 billion).

The market opened up 0.24 percent and soon rose to the day's high, up 116.79 points in the early morning trading, vaulting the Taiex past the 60-day moving average backed by the electronics sector in the wake of a 1.39 percent increase in the tech-heavy Nasdaq index and a 1.86 percent rise on the Philadelphia Semiconductor Index on the U.S. markets overnight, dealers said.

But, with some investors shifting to the sell side to pocket gains, large-cap electronics stocks such as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) and iPhone assembler Hon Hai Precision Industry Co. failed to sustain their earlier gains, capping the upturn on the broader market by the end of the session, dealers added.

"Judging from the large short position futures contracts owned by foreign institutional investors, I think many of them remained wary of the movement of the spot market as they feared a recent rally would be further eroded by profit taking," Moore Securities Investment Consulting analyst Adam Lin said, adding foreign institutional investors held about 34,000 more short position futures contracts than long position ones as of Monday.

Also on Monday, foreign institutional investors sold a net NT$3.28 billion worth of shares on the main board despite a 0.27 percent increase in the Taiex.

"It was why investors locked in their earlier gains, in particular after witnessing the Taiex breaching briefly the 60-day moving average," Lin said. "There were growing concerns over a possible major pullback with high technical hurdles ahead of that level."

Lin urged investors to keep alert over whether foreign institutional investors trim their short position futures contracts in a meaningful manner.

With investors rushing to lock in their earlier gains, TSMC, the most heavily weighted stock in the local market, closed unchanged at NT$973.00 after coming off a high of NT$977.00.

"TSMC has moved closer to the critical NT$1,000 mark and it was no surprise that the stock has faced heavy technical downward pressure before jumping over that hurdle," Lin said. "Today's light turnover also made it hard for big stocks like TSMC to climb out of consolidation."

Second to TSMC in terms of market value, Hon Hai, also known as Foxconn globally. fell 0.27 percent to end at NT$186.50 after hitting a high of NT$191.00, and smartphone IC designer MediaTek Inc., No. 3 in market capitalization, lost 0.40 percent to close at NT$1,250.00, coming off a high of NT$1,270.00.

Outperforming the entire semiconductor industry, which gained 0.03 percent, IC packaging and testing services provider ASE Technology Holding Co. ended up 0.65 percent at NT$155.00.

Also in the electronics sector, which rose only 0.09 percent, artificial intelligence server maker Quanta Computer Inc. rose 2.16 percent to end at NT$284.00, and rival Wistron Corp. added 0.50 percent to end at NT$101.00.

"At a time when tech heavyweights moved in a narrow range, investors should set their sights on old economy stocks which are riding the waves of the favorable government policies to grow. Biotech and electric machinery stocks are part of them," Lin said.

In the biotech industry, which rose 1.93 percent, synovial fluid supplement provider SciVision Biotech Inc. surged 10 percent, the maximum daily increase, to close at NT$136.50, and oncology and specialty generics drug developer Lotus Pharmaceutical Co. gained 2.15 percent to end at NT$284.50.

In the electric machinery industry, which added 1.34 percent, Fortune Electric Co. rose 1.31 percent to close at NT$694.00, and Allis Electric Co. added 1.56 percent to end at NT$130.50.

Elsewhere in the old economy sector, King's Town Construction Co. shed 9.19 percent to close at NT$123.50, and Huang Hsiang Construction Corp. lost 7.93 percent to end at NT$65.00.

The financial sector rose 0.19 percent with Shin Kong Financial Holding Co. up 6.31 percent to close at NT$11.80 in a possible merger with Taishin Financial Holding Co., which rose 0.81 percent to end at NT$18.75.

"I suggest investors place more emphasis on smaller stocks on the over-the-counter market at a time when large-cap stocks on the main board are confined by low turnover," Lin said. The OTC index closed up 0.45 percent on Tuesday.

According to the TWSE, foreign institutional investors shifted to the buy side, registering a net buy of NT$4.75 billion worth of shares on the main board Tuesday.