Taiwan shares end up over 360 points after Fed's rate cut

Taipei, Sept. 19 (CNA) Shares in Taiwan moved higher by more than 360 points to close above the 22,000 point mark Thursday after the U.S. Federal Reserve, as expected, cut interest rates for the first time in four years, dealers said.

Amid hopes of increasing liquidity, investors in Taiwan rushed to pick up large-cap stocks across the board, led by the bellwether electronics sector, bouncing back from an initially weak start, dealers added.

The Taiex, the benchmark weighted index on the Taiwan Stock Exchange (TWSE), ended up 363.85 points, or 1.68 percent, at the day's high of 22,042.69 after coming off a low of 21,656.66. Turnover totaled NT$327.71 billion (US$10.26 billion).

The market closed down 3.44 points and fell to the day's low in the early morning session because of continued weakness Thursday, the September futures contract settlement day, dealers said.

However, market attention soon shifted to the gains posted on other regional markets, such as Tokyo. This led to the Taiex regaining its footing, as investors learned about the Fed's first rate cut in four years and the hint of more rate cuts ahead, dealers added.

The strength of the local main board continued until the end of the session, as investors ignored the marginal losses on the U.S. markets overnight, dealers said.

After wrapping up a two-day policymaking meeting, the Fed lowered its key interest rates by 50 basis points, the higher end of the market's estimate, to a range between 4.75 percent and 5 percent.

Through its "dot plot", the American central bank hinted further reductions of 50 basis points were in the pipeline.

A dot plot is a chart updated quarterly that records each Fed official's projection of interest rate movements, which indicates what it may do next regarding its monetary policy.

"Uncertainties over the Fed policy have been removed," Moore Securities Investment Consulting analyst Adam Lin said. "More importantly, the Fed emphasized the U.S. economy remained solid, despite the outsized rate cut."

Fed Chair Jerome Powell said the U.S. economy remained "in a good shape," and suggested the large rate cut came due to reduced risks from inflation.

"In addition to the positive signs on the regional markets, U.S. stock futures moving higher points to a higher opening in the spot markets later in the day," Lin said. "So, investors looked to pick up bargains following earlier losses on hopes that the Fed relaxing its monetary policy would lead to more market liquidity and higher share prices."

The electronics index rose 1.86 percent with the semiconductor sub-index up 1.90 percent after contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) gained 2.02 percent to close the day's high of NT$960.00. TSMC's gains contributed about 155 points to the Taiex rise Thursday.

Buying also spread to other semiconductor stocks with smartphone IC designer MediaTek Inc. rising 1.36 percent to close at NT$1,120.00. In addition, highly-priced IC stocks, in particular, attracted even stronger interest, including application-specific integrated circuit (ASIC) Alchip Technologies Ltd., which rose 4.65 percent to end at NT$2,365.00.

Bucking the upturn, United Microelectronics Corp., a smaller contract chipmaker, lost 0.19 percent to close at NT$53.70, and IC packaging and testing services provider ASE Technology Holding Co. dropped 0.33 percent to end at NT$152.00.

Also in the tech sector, continued optimism toward artificial intelligence development pushed up AI-related stocks, dealers said. Second to TSMC in terms of market value, iPhone assembler Hon Hai Precision Industry Co., which also rolls out AI servers, gained 1.44 percent to close at NT$176,50, and Quanta Computer Inc., another major AI server supplier, rose 1.20 percent to end at NT$253.00.

"Non-tech stocks also rode the waves of rising liquidity to push up the Taiex further by the end of the session," Lin said.

The petrochemical index rose 1.31 percent on its low valuation with Nan Ya Plastics Corp. rising 1.90 percent to close at NT$42.95, Formosa Chemicals & Fibre Corp. gaining 0.86 percent to end at NT$41.00, and Formosa Plastics Corp. growing 0.62 percent to close at NT$48.55. However, Formosa Petrochemical Corp. ended down 0.19 percent at NT$51.40.

In the electric machinery industry, which rose 1.59 percent on the back of an increase in orders, Shihlin Electric & Engineering Corp. added 2.08 percent to close at NT$220.50, and Chung-Hsin Electric & Machinery Manufacturing Corp. gained 1.19 percent to end at NT$169.50.

Although the market expected the local central bank to come up with more credit control on the home market following its quarterly policymaking meeting Thursday afternoon, the construction industry still rose 2.54 percent.

King's Town Construction Co. was up 3.83 percent to close at NT$122.00 and Highwealth Construction Corp. was up 5.45 percent to end at NT$54.20.

In the financial sector, which gained 1.30 percent, Cathay Financial Holding Co. rose 2.53 percent to close at NT$64.80, and Fubon Financial Holding Co. also ended up 2.53 percent at NT$89.30.

"The U.S. markets could face some volatility Friday, the quadruple witching day, before turning stable next week," Lin said. "The Taiex is likely to follow the stable U.S. markets and challenge the next technical resistance ahead of 22,346 points, the 60-day moving average, as foreign institutional investors move more funds into the local market."

A quadruple witching day occurs when four different types of futures and options contracts expire at the same time.

According to the TWSE, foreign institutional investors bought a net NT$27.11 billion worth of shares on the main board Thursday.