Taiwan shares close up but gains capped by MSCI weighting changes

Taipei, Aug. 30 (CNA) Shares in Taiwan closed higher Friday but gains were limited by looming downgrades to the country's weighting in two of MSCI Inc.'s major indices, dealers said.

The bellwether electronics sector saw most of its upturn eroded, while select nontech stocks in the transportation and construction industries attracted rotational buying to lend support to the broader market, dealers added.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended up 66.24 points, or 0.30 percent, at 22,268.09 after moving between 22,230.07 and 22,342.25. Turnover totaled NT$400.84 billion (US$12.53 billion).

The market opened up 0.13 percent and moved to the day's high by rising about 140 points at one point on a technical rebound from a 0.75 percent slump a session earlier as investors largely ignored a 0.23 percent decline on the tech-heavy Nasdaq index led by a 6.4 percent plunge of U.S.-based artificial intelligence chip designer Nvidia Corp. overnight.

But some investors shifted to the sell side, trimming their holdings in electronics stocks, in particular contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) with turnover expanding by about NT$117.5 billion in the last few minutes into the end of the session, which limited the gains on the Taiex in response to the MSCI's planned weighting changes, first announced in mid-August.

After the end of trading, Taiwan's weighting in the MSCI Emerging Markets Index, closely watched by foreign institutional investors, was cut by 0.32 percentage points to 19.01 percent after a quarterly review.

The index provider also cut Taiwan's weighting in the MSCI All-Country Asia ex-Japan Index, to 21.94 percent from 22.12 percent.

Taiwan's weighting in the MSCI All-Country World Index stayed unchanged at 1.98 percent.

"It was understood that foreign passive mutual funds moved to cut their holdings to bring their portfolios closer to the new weighting adjustments by MSCI," MasterLink Securities analyst Tom Tang said.

"The selling in the last few minutes focused on TSMC but the stock still closed slightly higher and appeared resilient compared with Nvidia," Tang said.

TSMC, the most heavily weighted stock in the local market, rose 0.11 percent to close at NT$944.00 after coming off a high of NT$952.00. Led by TSMC, the electronics index rose only 0.08 percent to end at 1,189.39, off a high of 1,195.97, with the semiconductor sub-index up 0.09 percent.

Tang said the sell-off suffered by Nvidia came as guidance provided by the company failed to hit the higher end of the earlier market expectations but met the average market estimate.

"Compared with Nvidia, TSMC had been a lagger, so the Taiwanese stock outperformed today," Tang said. "More important, an outlook about AI remains rosy and investors simply seized on Nvidia's guidance as an excuse to pocket their earlier gains."

In the semiconductor industry, smartphone IC designer MediaTek lost 0.80 percent to end at NT$1,240.00, while IC packaging and testing services provider ASE Technology Holding Co. rose 0.99 percent to close at NT$153.50 and United Microelectronics Corp., a smaller contract chipmaker, ended up 1.65 percent at NT$55.50.

Among other tech heavyweights, iPhone assembler Hon Hai Precision Industry Co., second to TSMC in terms of market value, ended unchanged at NT$184.50, while AI server maker Quanta Computer Inc. lost 1.47 percent to end at NT$268.00.

While the tech sector largely moved in the doldrums, "investors sought to park their funds in old economy stocks, and today, construction and shipping stocks were spotlighted due to their relatively low valuations," Tang said.

After recovering from recent steep losses caused by a move by the banking sector to tighten lending to home buyers, the construction industry rose 3.72 percent. Among property developers, JSL Construction & Development Co. soared 10 percent, the maximum daily increase, to close at NT$199.00, and King's Town Construction Co. rose 7.33 percent to end at NT$124.50.

The transportation index rose 1.56 percent on rotational buying with Evergreen Marine Corp. up 1.90 percent to close at NT$188.00 and rivals Yang Ming Marine Corp. and Wan Hai Lines Ltd. up 2.54 percent and 4.67 percent, respectively, to end at NT$64.50 and NT$82.90.

In the financial sector, which rose 0.54 percent, Cathay Financial Holding Co. rose 0.63 percent to close at NT$63.50 and Fubon Financial Holding Co. gained 0.69 percent to end at NT$91.90.

"I expected consolidation will continue with the nearest floor of the Taiex likely to be seen around 21,800 points, the 20-day moving average," Tang said, "A better scenario is that if Nvidia turns stable soon, TSMC could lead the broader market to challenge the 60-day moving average of 22,524 points."

Tang urged investors to keep a close eye on the July U.S. Personal Consumption Expenditure Price Index (PEC) due later in the day for a better sense about how inflation evolves in the United States, which could dictate the Federal Reserve's monetary policy.

Despite the rise on the Taiex, foreign institutional investors sold a net NT$4.74 billion worth of shares on the main board Friday, according to the TWSE.