Taiwan shares edge down as TSMC trims losses

Taipei, Oct. 22 (CNA) Shares in Taiwan recovered from earlier weakness to end only slightly lower Tuesday as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) trimmed its losses in the late trading session, dealers said.

The local main board continued to see interest in artificial intelligence related stocks such as iPhone assembler Hon Hai Precision Industry Co., which rolls out AI servers, while a strong rebound staged by the financial sector also lent support to the broader market, dealers added.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 7.10 points, or 0.03 percent, at the day's high of 23,535.43, off a low of 23,269.86. Turnover totaled NT$372.65 billion (US$11.65 billion).

The market opened down 0.49 percent as TSMC, the most heavily weighted stock on the local market, came under pressure, falling 1.84 percent in the wake of news reports from the United States overnight that said if Donald Trump wins the Nov. 5 presidential election, Washington could scrap a deal to give the chipmaker subsidies for its massive investments in Arizona, dealers said.

However, as TSMC lead the bellwether electronics sector and the market as a whole lower, pushing the Taiex down by about 273 points to the day's low, bargain hunters turned active to pick up the chipmaker's shares, dealers added.

Along with interest in AI server stocks and large cap financial stocks, the Taiex recovered from initial weakness to minimize its losses by the end of the session, they said.

"The U.S. presidential vote is the largest uncertainty for the market," Mega International Investment Services Corp. analyst Alex Huang said. "That's why the reports on the possible cancellation of the subsidies to TSMC affected investor sentiment."

In April, the U.S. Department of Commerce announced it has signed a non-binding preliminary memorandum of terms (PMT) with TSMC for up to US$6.6 billion in direct funding under the CHIPS and Science Act. for its US$65 billion investments in Arizona, where the chipmaker is building two advanced fabs and plans a third.

In an interview in June, Trump said: "Taiwan took our chip business," and as Taiwan is "immensely wealthy" the U.S. should not be giving it "billions of dollars to build chips."

On Tuesday, TSMC lost 0.92 percent to close at NT$1,075.00, off a low of NT$1,060.00. Its rebound reduced the fall on the Taiex by about 120 points by the end of the session.

"As TSMC shares posted significant gains on Friday after it gave better-than-expected guidance for 2024 a day earlier, investors simply seized the Trump fears to lock in profits initially today, but then moved to hunt bargains based on its sound fundamentals," Huang said. "The stock remains in an uptrend after the current consolidation."

Last week, TSMC upgraded its sales growth forecast for 2024 to almost 30 percent in U.S. dollar terms from an earlier estimate of 24-26 percent in April.

However, other major semiconductor stocks appeared mixed with smartphone IC designer MediaTek Inc. down 1.50 percent to end at NT$1,310.00, whereas IC packaging and testing services provider ASE Technology Holding Co. rose 1.55 percent to close at NT$164.00.

"Shares in (U.S.-based) AI chip designer Nvidia Corp. continued to move higher on the U.S. market overnight as shipments of GB200 AI servers (powered by Nvidia's Blackwell graphics processing units) will start this quarter," Huang said. "It was understood that local AI-related stocks would attract buying today to offset the losses incurred by TSMC."

Second to TSMC in terms of market capitalization, Hon Hai, also known as Foxconn on the global markets, gained 2.62 percent to close at NT$319.00, and Quanta Computer Inc., No. 3 in market value, rose 2.26 percent to end at NT$319.00.

Wistron Corp., another AI server maker, gained 2.26 percent to close at NT$113.00. and its cloud-enabled service subsidiary Wiwynn Corp. also added 2.53 percent to end at NT$2,025.00.

"Moreover, the financial sector made a comeback today after a slump yesterday with heavyweights bouncing back to offset the Taiex's losses," Huang said.

With the financial index up 0.92 percent, Fubon Financial Holding Co. rose 2.64 percent to close at NT$93.30, and Cathay Financial Holding Co. gained 1.46 percent to end at NT$69.30.

The old economy sector remained concerned by worries over demand from China and raw material stocks fell victim to those concerns, Huang said.

Formosa Plastics Corp. lost 1.27 percent to close at NT$46.70, and Nan Ya Plastics Corp. fell 1.19 percent to end at NT$41.35. In addition, China Steel Corp., the largest steel maker in Taiwan, dropped 0.88 percent to close at NT$22.40, and Tung Ho Steel Corp. ended down 2.61 percent at NT$74.50.

"Judging from today's movement, the Taiex faces the nearest technical resistance ahead of 24,000 points," Huang said. "Amid uncertain political factors from the U.S., I urge investors to sell on any technical rebound to avoid losses down the road."

According to the TWSE, foreign institutional investors bought a net NT$7.86 billion worth of shares on the main board Tuesday.