Taiwan stocks drop as foreign investors boost short futures positions

Taipei, Nov. 27 (CNA) Taiwan stocks plunged Wednesday as foreign institutional investors increased short futures positions to hedge against potential risks in the spot market.

Market sentiment remained cautious after U.S. President-elect Donald Trump's threats of tariffs on goods from China, Canada and Mexico, which pushed down large-cap tech stocks.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 343.98 points, or 1.52 percent, at the day's low of 22,334.78, off a high of 22,743.99. Turnover totaled NT$371.73 billion (US$11.41 billion).

The market opened down 13.18 points and continued struggling for the rest of the session, as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) and iPhone assembler Hon Hai Precision Industry Co. came under pressure, despite another record high on the Dow Jones Industrial Average and the broader S&P 500 index overnight.

"Foreign institutional investors appeared cautious about the local stock market because they own more short futures contracts," Moore Securities Investment Consulting analyst Adam Lin (林漢偉) said.

On Tuesday, foreign institutional investors owned 48,462 more short futures contracts than long ones, up 2,119 from Monday.

"Amid the caution, selling was focused on tech heavyweights, like TSMC, as it was the most effective way to drive down the spot market and profit from futures," Lin said.

"Today's selloff plunged the Taiex below the critical technical support ahead of the 60-day moving average (around 22,580 points), making the local main board technically weaker," Lin added.

TSMC, the most heavily weighted stock in the local market, lost 0.99 percent to close at NT$1,000.00. TSMC's losses contributed about 80 points to the decline of the Taiex Wednesday, sending the electronics index lower by 1.50 percent.

Weakness was also seen among other semiconductor stocks with smartphone IC designer MediaTek Inc. down 2.34 percent to end at NT$1,250.00.

Meanwhile, United Microelectronics Corp., a smaller contract chipmaker, ended down 2.20 percent to close at NT$44.00. IC packaging and testing services provider ASE Technology Holding Co. ended down 2.90 percent at NT$150.50.

"Foreign institutional selling also included other tech heavyweights, including Hon Hai, amid fears of Trump's tariff war affecting investment plans in Mexico," Lin said.

After falling 3.80 percent on Tuesday, Hon Hai, second to TSMC in terms of market value, lost another 2.96 percent to close at NT$196.50. Hon Hai, also known as Foxconn on the global markets has plans to build a giant artificial intelligence server factory with U.S.-based AI chip designer Nvidia Corp.

In an industrial technology forum held in Taipei Wednesday, Hon Hai Chairman Young Liu (劉揚偉) said his company will continue to invest in Mexico as the country is one of the most important markets in the Americas.

Weakness was also seen among old economy industries with the transportation index falling 3.66 percent. This followed a ceasefire between Israel and Hezbollah, which led to falling freight rates.

Evergreen Marine Corp., the largest container cargo shipper in Taiwan, lost 6.75 percent to close at NT$214.00, and rivals Yang Ming Marine Transport Corp. and Wan Hai Lines Ltd. fell 5.91 percent and 5.80 percent, respectively, to end at NT$71.70 and NT$84.50.

The ceasefire deal also weakened international crude oil prices, sending the petrochemical industry lower by 1.39 percent. Formosa Plastics Corp. ended 1.25 percent down at NT$43.30, and Nan Ya Plastics Corp. fell 1.87 percent to NT$39.35.

In the financial sector, which only fell 0.49 percent, Fubon Financial Holding Co. lost 1.44 percent to close at NT$88.80, while Shanghai Commercial and Savings Bank rose 3.21 percent to end at NT$38.60.

"Investors should watch whether the Taiex rebounds or if there are further losses," Lin noted, suggesting that the value of the Taiwanese dollar could indicate the moves foreign institutional investors make.

According to the TWSE, foreign institutional investors sold NT$40.99 billion worth of shares on the main board Wednesday.