Taiwan shares end sharply down amid worries over U.S. economy

Taipei, Sept. 9 (CNA) Shares in Taiwan closed sharply lower on Monday, driven by heavy losses in U.S. markets late last week and growing concerns over the American economy following disappointing August job data, according to dealers.

The sell-off on the local main board was concentrated in the bellwether electronics sector. However, with some bargain hunters turning active, the benchmark index saw losses capped above 20,922.17 points -- an intraday low on Sept. 4.

On that day, the index posted its third largest single-session drop in history, plummeting 999.46 points, or 4.52 percent, to close at 21,092.75, dealers said.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 290.75 points, or 1.36 percent, at 21,144.44 on Monday after moving between 20,922.51 and 21,163.91. Turnover totaled NT$302.48 billion (US$9.43 billion).

The market opened down 1.43 percent in a knee jerk reaction to the plunge on U.S. markets, where the Dow Jones Industrial Average lost 1.01 percent and the tech-heavy Nasdaq index shed 2.55 percent after poorer than expected August nonfarm payroll data, dealers said.

With the Taiex moving closer to the intraday low on Sept. 4 with large cap tech stocks in the spotlight, bargain hunting emerged, helping the broader market recoup part of its earlier losses by the end of the session, dealers added.

On Friday, Washington reported the U.S. economy created 142,000 jobs in August, which was below earlier market expectations for about 165,000 jobs, while the jobless rate moved slightly lower from 4.3 percent in July to 4.2 percent.

After weaker than expected manufacturing activity in August, "the latest nonfarm payroll data raised fears over a recession in the United States," Concord Securities analyst Kerry Huang said.

As a result, "the Federal Reserve could act more aggressively in its rate cut cycle to stimulate the economy," Huang said.

The Fed has scheduled a policymaking meeting for Sept. 17-18, Huang continued, and the market widely anticipates the American central bank will cut rates by 25 basis points this time, but that rate cuts will be larger later this year.

"For the moment, investors simply trimmed their holdings," Huang said. "After spotting a tumble among tech stocks on U.S. markets Friday, local investors rushed to dispose of electronic stocks, in particular in the semiconductor industry, today."

TSMC, tech stocks

After a 4.20 percent plunge in its American depositary receipts (ADRs) on Friday, contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) lost 2.07 percent to close at NT$899.00 after coming off a low of NT$891.00 on the local main board Monday.

TSMC's losses contributed about 150 points to the Taiex's fall and sent the electronics index and semiconductor sub-index down by 1.52 percent and 1.93 percent, respectively.

"TSMC and other tech stocks recovered part of their earlier losses so the Taiex stayed above the Sept. 4 low," Huang said. "I suspect bargain hunting came from local institutional investors, while their foreign counterparts largely stayed cautious."

According to the TWSE, foreign institutional investors sold a net NT$50.12 billion worth of shares on the main board Monday.

Among other semiconductor stocks, application specific integrated circuit (ASIC) designer AIchip Technologies Inc. shed 4.32 percent to end at NT$2,325.00, and smartphone IC designer MediaTek Inc. lost 3.49 percent to close at NT$1,105.00.

Bucking the downturn, IC packaging and testing services provider ASE Technology Holding Co. rose 0.35 percent to end at NT$142.00.

In the wake of a 4.09 percent fall in the shares of U.S.-based artificial intelligence chip designer Nvidia Corp. on Friday, AI server maker Quanta Computer Inc. lost 2.53 percent to close at NT$250.00, and rival Inventec Corp. dropped 2.42 percent to end at NT$42.25.

Although Apple Inc. is expected to unveil its newest iPhones Monday (U.S. time), iPhone assembler Hon Hai Precision Industry Co., second to TSMC in terms of market value, fell 2.55 percent to close at NT$172.00, and Largan Precision Co., a supplier of smartphone camera lenses to Apple, ended down 1.46 percent at NT$2,700.00.

Hard landing for U.S. economy?

"Fears over a hard landing for the U.S. economy that will push down global demand also cost old economy stocks in the raw material industry," Huang said.

In the petrochemical industry, which lost 1.15 percent, Formosa Petrochemical Corp. shed 4.72 percent to close at NT$48.50, Formosa Chemicals & Fibre Corp. lost 3.86 percent to end at NT$37.35, Formosa Plastics Corp. dropped 2.70 percent to close at NT$45.00, and Nan Ya Plastics Corp. ended down 1.62 percent at NT$39.40.

The steel industry also felt the pinch, falling 1.89 percent, with China Steel Corp., the largest steel maker in Taiwan, down 2.38 percent to close at NT$20.55, and Tung Ho Steel Corp. down 1.02 percent to end at NT$78.00.

The construction industry fell 1.89 percent on expectations that the central bank will come up with more credit controls to rein in the home market, dealers said.

King's Town Construction Co. lost 2.67 percent to close at NT$109.50, and JSL Construction & Development Co. fell 5.35 percent to end at NT$203.50.

In the financial sector, which lost 0.92 percent, Fubon Financial Holding Co. fell 2.38 percent to close at NT$86.00 and Cathay Financial Holding Co. ended down 1.57 percent at NT$62.50.

"Before the Fed's meeting, it is possible consolidation will continue on U.S. markets and the Taiwan market will just follow suit," Huang said. "Investors had better stay on the sidelines and just watch."