Taipei, Shares in Taiwan extended their losses Tuesday from the previous session as major suppliers to Apple Inc. came under pressure after the U.S. consumer electronics giant was downgraded amid worry over iPhone shipments, dealers said.
Market sentiment was also affected by dampened hopes that the United States Federal Reserve would cut interest rates soon, in view of the U.S.' better than expected jobs report for June, dealers said.
The weighted index on the Taiwan Stock Exchange (Taiex) ended down 48.44 points, or 0.45 percent, at 10,702.78, after moving between 10,680.85 and 10,733.57. Turnover totaled NT$93.37 billion (US$2.99 billion) during the session.
The market opened down 0.45 percent as investors here took cues from the losses on the U.S. markets, where the Dow Jones Industrial Average closed 0.43 percent lower and the techheavy Nasdaq index dropped 0.78 percent overnight following a downgrade of Apple that battered tech stocks, dealers said.
Selling on the local main board continued from Monday, but the losses were capped after the Taiex fell below 10,700 points as buying emerged in some old economy and financial stocks that were seen as a safe haven, dealers added.
"The downgrade of Apple triggered selling in the stocks of large Taiwanese suppliers, in particular iPhone assembler Hon Hai Precision Industry Co. and smartphone camera lens maker Largan Precision Co.," said Alex Huang, an analyst at Mega International Investment Services Corp.
Apple accounts for about 40 percent of the total sales of Hon Hai and Largan.
On Monday, Apple shares closed down 2.06 percent after an analyst at Rosenblatt Securities downgraded the recommendation on the stock from "neutral" to "sell."
Apple is likely to "face fundamental deterioration over the next 6 to 12 months" amid disappointing iPhone sales and slow sales growth of other products, the analyst said.
In the wake of that forecast, Hon Hai fell 1.39 percent Tuesday to close at NT$77.90, while Largan dropped 2.31 percent to end at NT$4,020.00. Among other major Apple concept stocks, contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock on the local market, fell 0.21 percent to finish at NT$242.00, and metal casing maker Catcher Technology Co. lost 1.94 percent to end at NT$227.00.
"TSMC appeared resilient today, which prevented the Taiex from falling further, since the chipmaker has a diversified client portfolio, and Apple is just one of its clients," Huang said.
With the tech heavyweights suffering losses, the bellwether electronics sector closed down 0.82 percent.
Huang said the electronics sector was also affected by investors' decision to move their funds into select old economy and financial stocks throughout the trading session.
Among the old economy stocks, food brand UniPresident Enterprises Corp. rose 1.34 percent to close at NT$82.90, and Wei Chuan Foods Corp. gained 4.47 percent to end at NT$32.75 on expectations of higher beverage sales in summer.
In the financial sector, which closed down 0.19 percent, Mega Financial Holding Co. added 0.64 percent to close at NT$31.60, and Yuanta Financial Holding Co. rose 0.85 percent to end at NT$17.90, while Cathay Financial Holding Co. finished 0.24 percent lower at NT$41.85.
Meanwhile, Formosa Plastics Corp., which is facing a US$162 million fine in the U.S., dropped 1.92 percent to end at NT$102.00.
In June, a Texasbased subsidiary of Formosa Plastics was found by a Texas court to be in violation of stateissued permits and the federal Clean Water Act, over the discharge of plastic pellets into bays and creeks by its plant in Point Comfort. Formosa Plastics has said the court verdict can be appealed.
Huang noted that despite the losses on the Taiex Tuesday, it managed to close above the 60day moving average of 10,693 points. That showed resilience amid volatility in the U.S. markets, he said.
"The Taiex needs higher turnover NT$100 billion or more to overcome the nearest resistance ahead of the 20day moving average of 10,716 points," Huang said. "But with many foreign institutional investors away for the summer vacation, trade is expected to remain quiet."
According to Taiex data, foreign institutional investors sold a net NT$3.22 billion worth of shares on the main board Tuesday.
Source: Focus Taiwan News Channel