Shares in Taiwan dropped Monday from a more than 1 percent increase seen a week earlier as smartphone camera lens supplier Largan Precision Co. (???) moved lower after irregularities were found in the trading of the stock, which triggered 22 brief trading suspensions during the session, dealers said.
Market sentiment turned cautious ahead of an earnings season at home and on Wall Street that will start later this week, prompting investors to pause for more clues on how to park their funds in the market, the dealers said.
The weighted index on the Taiwan Stock Exchange (TWSE) closed down 29.80 points, or 0.32 percent, at 9,342.42, after moving between 9,328.19 and 9,404.90, on turnover of NT$63.85 billion (US$1.99 billion).
The market opened up 4.26 points and rose to the day's high, breaching the 9,400-point mark in a knee-jerk reaction to gains on Wall Street, where the Dow Jones Industrial Average closed up 0.35 percent and the tech-heavy NASDAQ index ended up 0.60 percent to hit a record high on Friday, the dealers said.
However, selling emerged, in particular after 10 a.m., as investors rushed to shift to the sell side when trading of Largan shares was suspended briefly 22 times, pushing down the electronics sector as well as the broader market into negative territory, the dealers said.
Selling also focused on the paper sector, locking in the 14 percent gains built for the sector last week, they added.
"It is rare for a stock to encounter brief trading suspensions 22 times in a single session," equity analyst Vickie Hsieh said. "As Largan is one of the most important stocks on the main board, investors wanted to figure out what had happened and before that, they simply dumped the stock for the moment."
Shares of Largan, the most expensive stock in the local equity market, closed down 3.26 percent to close at NT$4,010.00, off an early high of NT$4,245.00. Before its shares were suspended, the stock had continued the momentum seen in the previous trading sessions amid optimism toward its bottom line.
According to the TWSE, the exchange's price stabilizing mechanism found some irregularities in trading orders involving Largan shares, which led to the 22 brief trading suspensions. Under the current price stabilizing mechanism, as long as a price matching simulation system finds that a stock could rise or fall more than 3.5 percent after matching potential buyers and sellers on a trial basis, trading of the stock will be suspended for two to three minutes.
The TWSE said that it has launched an investigation into Largan's trading to find out whether there was any manipulation involving the stock.
"Caution toward Largan also spread to other high-tech stocks. That's why the broader market moved down in the mid-morning session and the weakness continued into the end of the session," Hsieh said.
In the electronics sector, which closed down 0.35 percent, Hon Hai Precision Industry Co. (??), an assembler of iPhones and iPads for Apple Inc., lost 0.36 percent to end at NT$83.50 after hitting NT$84.30, while contract chip maker Taiwan Semiconductor Manufacturing Co. (TSMC, ???), the most heavily weighted stock in the local market, closed unchanged at NT$184.00, off an early high of NT$185.00.
The paper sector, which posted significant gains last week due to a tight supply and a spike in product prices, closed down 1.55 percent. Among the falling paper stocks, Taiwan Pulp and Paper Corp. (??) lost 1.27 percent to end at NT$11.65, and Cheng Loong Corp. (??) shed 3.93 percent to close at NT$14.65.
"Despite the downturn, it seems that the main board had strong technical support at around 9,300 points," Hsieh said. "Still, investors should pay attention to the earnings season to better understand the market conditions for the current quarter."
Largan and TSMC have scheduled their own investor conferences for Thursday to detail the fourth-quarter results of last year and give guidance for the first quarter of this year.
Source: Focus Taiwan News Channel