Taiwan shares end down as tech sector hit by Fed worries

Taipei, Nov. 18 (CNA) Shares in Taiwan took a beating Monday, down almost 200 points, as the bellwether electronics sector followed tech stocks on U.S. markets to trend lower amid fears that the Federal Reserve is set to slow down the pace of its current rate cut cycle, dealers said.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 196.23 points, or 0.86 percent, at 22,546.54 after moving between 22,503.69 and 22,781.77. Turnover totaled NT$348.65 billion (US$10.72 billion).

The market opened down 0.21 percent and returned to an uptrend to hit the day's high, rising 39 points in the early morning session. Thereafter, selling reemerged with large-cap tech stocks in focus in the wake of a 2.24 percent tumble on the tech-heavy Nasdaq index and a 3.42 percent plunge on the Philadelphia Semiconductor Index Friday, a reflection of the Fed concerns, dealers said.

On Thursday, Fed Chair Jerome Powell said that the central bank was not "in a hurry" to cut interest rates as the U.S. continued to enjoy strong economic growth. In addition, Boston Fed President Susan Collins made sentiment even more cautious, telling The Wall Street Journal on Friday that a rate cut in December is not a sure thing.

The weakness on the local main board continued until the end of the session Friday with the electronics sector losing 1.27 percent and the semiconductor sub-index falling 1.12 percent, although the Taiex still closed above the nearest technical support around the 60-day moving average of 22,529 points.

"The U.S. economy stays resilient despite the Fed's recent rate hikes. After Fed officials struck a cautious tone on easing monetary policy, caution set in," Hua Nan Securities analyst Kevin Su said.

"As a result, the yield of the benchmark 10-year treasury hovered at a recent high of more than 4 percent, making tech stocks on U.S. markets look less attractive," Su said. "It was no surprise the local electronics sector came under pressure with the sell-off featuring TSMC (Taiwan Semiconductor Manufacturing Co.)," Su added.

After a fall of 1.32 percent in its American depositary receipts on Friday, TSMC, the most heavily weighted stock on the local market, fell 0.97 percent to close at NT$1,025.00, although it came off a low of NT$1,020.00. TSMC's losses contributed about 80 points to the Taiex's fall on Monday.

Other semiconductor stocks also faced headwinds with smartphone IC designer MediaTek Inc. down 2.36 percent to end at NT$1,240.00, and IC packaging and testing services provider ASE Technology Holding Co. down 2.26 percent to close at NT$151.50. Bucking the downturn, United Microelectronics Corp., a smaller contract chipmaker, rose 0.22 percent to end at NT$45.10.

"Shares in (U.S.-based artificial intelligence chip designer) Nvidia Corp. trended lower on Friday as investors largely waited for its results on Wednesday (U.S. time) so local AI-related stocks simply followed suit, adding pressure to the broader market," Su said.

Second to TSMC in terms of market value, iPhone assembler Hon Hai Precision Industry Co., which also rolls out AI servers, lost 2.17 percent to close at NT$202.50, and Quanta Computer Inc., another AI server maker, fell 2.19 percent to end at NT$290.50.

"When the electronics sector incurred losses, some investors moved their money to select old economy industries. Today, plastics and chemical stocks stood out due to their relatively low valuations," Su said. "But, I prefer to take a cautious stance as these stocks still face a global supply glut."

In the petrochemical industry, which rose 1.95 percent, Formosa Plastics Corp. rose 5.98 percent to close at NT$47.00, Nan Ya Plastics Corp. gained 4.21 percent to end at NT$42.05, Formosa Petrochemical Corp. grew 2.89 percent to close at NT$44.55 and Formosa Chemicals & Fibre Corp. ended up 2.40 percent at NT$36.25.

Certain stocks sitting on large property assets which are expected to offset the impact of inflation also attracted strong interest with Nankang Rubber Tire Corp. rising 4.14 percent to close at NT$47.80, and Taiwan Fertilizer Co. growing 3.64 percent to end at NT$57.00, Su said.

"In addition to caution toward the Fed, today's turnover remained thin also because many investors are still concerned by uncertainties before Donald Trump returns to the White House in January," Su said. "It is possible the Taiex will continue to move in consolidation in the near future,"

According to the TWSE, foreign institutional investors sold a net NT$10.70 billion worth of shares on the main board Monday.