Taipei, Shares in Taiwan closed lower on Tuesday as investors locked in gains built earlier in the session after the main board breached 10,900 points and approached the critical 11,000 point level, dealers said.
The latest quarterly index review by MSCI Inc., which cut Taiwan's weighting on two of its indexes, prompted investors to shift to the sell side before the adjustments took effect after the market closed on Tuesday, they said.
The weighted index on the Taiwan Stock Exchange or the Taiex ended down 21.23 points, or 0.2 percent, at the day's low of 10,815.47, after moving to the day's high of 10,937.90, on turnover of NT$135.67 billion (US$4.65 billion).
The market opened up 0.55 percent and soon rose to the day's high, breaching the 10,900 point mark, led by large cap stocks, including contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), as investors took their cue from a rally on Wall Street, where the Dow Jones Industrial Average closed up almost 400 points or 1.39 percent overnight, dealers said.
With the Taiex moving closer to 11,000 points, selling emerged amid fears of a possible immediate pullback, while the cut in Taiwan's weighting on the two MSCI indexes also paved the way for downward pressure, in particular in the late trading session, they said.
On Feb. 12, MSCI announced it would cut Taiwan's weighting in its Emerging Markets Index and the All-Country Asia ex-Japan Index by 0.01 percentage points to 11.47 percent and 13.30 percent, respectively, while increasing its weighting in the All-Country World Index by 0.01 percentage points to 1.38 percent.
"The impact from the MSCI's move led to some selling in the late trading session before it took effect after the market closed today," Concord Securities analyst Kerry Huang said.
According to an estimate by the Financial Supervisory Commission, the weighting cut could prompt foreign institutional investors to move about US$1.1 billion worth of funds out of Taiwan, a small fraction of total foreign investor investments. "So, the selling from the weighting cut could be short lived," Huang said.
"But, I think the local main board is also bothered by fears of a major retreat when the weighted index came closer to 11,000 points," Huang said.
"Due to the high technical hurdles ahead of that level," Huang said, "many local investors preferred to pocket their gains instead of chasing prices for the moment."
Huang noted that many market heavyweights came off earlier highs and closed in negative territory.
TSMC, the most heavily weighted stock in the local market, fell 0.20 percent to close at NT$246.00 after hitting an early high of NT$250.50, with 40.79 million shares changing hands.
Without a rising TSMC, the bellwether electronics sector ended down 0.16 percent and the semiconductor sub-index also closed down 0.02 percent.
In the high-tech sector, iPhone assembler Hon Hai Precision Industry Co., second to TSMC in terms of market value, lost 0.79 percent to end at NT$88.10, off a high of NT$89.70, and shares in Largan Precision Co., a smartphone camera lens supplier to Apple Inc., shed 2.25 percent to close at NT$3,695.00, off a high of NT$3,865.00.
In the non-high tech sector, Formosa Chemicals & Fibre Corp. dropped 0.46 percent to close at NT$108.50 after hitting 110.50, while shares in Cathay Financial Holding Co. ended at NT$54.50, up 0.37 percent, after hitting NT$54.80.
"Market sentiment remains haunted by fears over the rate hike cycle to be carried out by the U.S. Federal Reserve this year," Huang said. "Moreover, the room for further gains on Wall Street is expected to be limited, which could affect the performance of the local market."
Source: Focus Taiwan News Channel