Taipei-Shares in Taiwan moved sharply higher Monday after the United States and China announced a truce in their trade war over the weekend, including an agreement to suspend the escalation of tariffs, dealers said.
Led by large cap tech firms, the bellwether electronics sector propelled the solid gains in the wake of a decision made by U.S. President Donald Trump to allow U.S. firms to sell products to Chinese telecom equipment supplier Huawei Technologies Co., they said.
The weighted index on the Taiwan Stock Exchange (TWSE), the Taiex, ended up 164.63 points, or 1.53 percent, at 10,895.46, after moving between 10,821.30 and 10,914.85, on turnover of NT$144.88 billion (US$4.68 billion).
The market opened up 0.84 percent in reaction to an agreement reached by Washington and Beijing on the sidelines of the June 28-29 G20 summit in Osaka to suspend trade tariff escalations and continue talks on the trade dispute, dealers said.
Buying accelerated after that, focusing on tech heavyweights such as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), which counts on Huawei for roughly 5-10 percent of its total sales.
"The market had widely expected a truce in the trade war during the G20 summit, Yong Cheng International Securities Investment Consulting analyst Jerry Chen said.
"However, a move to lift the business ban against Huawei by Trump came as a surprise, so that's why buying in so-called Huawei concept stocks appeared so strong, sending the Taiex sharply higher today," Chen said.
In a move Chinese media described as a U-turn, Trump lifted a ban to allow U.S. firms to sell equipment to Huawei, as long as the transactions will not present a "great, national emergency problem."
TSMC, the most heavily weighted stock in the local market, rose 3.97 percent to close at NT$248.50, the level the stock was at before going ex-dividend on June 24.
It meant the stock needed only six trading sessions to return to its prior ex-dividend level compared with 20 trading days required in 2018.
TSMC's gains alone contributed to an increase of about 95 points in the Taiex and boosted the bellwether electronics sector and the semiconductor sub-index by 2.86 percent and 3.65 percent, respectively, Monday.
Among other major Huawei suppliers, smartphone camera lens maker Largan Precision Co. rose 10 percent, the maximum daily increase, to end at NT$4,240.00, and printed circuit board producer Unimicron Technology Corp. also gained 10 percent to end at NT$79.40.
Hon Hai Precision Industry Co., the world's largest contract electronics maker, added 2.58 percent to close at NT$79.40.
"Judging from the solid gains made by these big tech stocks, I suspect foreign institutional investors stood on the buy side today," Chen said.
According to the TWSE, foreign institutional investors bought a net NT$7.23 billion in shares on the market Monday.
"While the electronics sector dominated today's trading, some large old economy stocks were in the doldrums," Chen said.
Old economy industrial stocks had become a safe haven in recent sessions as investors dumped tech stocks amid the U.S.-China trade dispute.
Among the falling old economy stocks, Hotai Motor Co., the local sales agent for Japan's Toyota Motor Corp., shed 1.97 percent to close at NT$498.00, food brand Uni-President Enterprises Corp. fell 1.45 percent to end at NT$81.50, and Formosa Chemicals and Fibre Corp. lost 0.97 percent to close at NT$102.00.
In the mixed financial sector, which edged 0.02 percent higher, Shanghai Commercial and Savings Bank fell 1.60 percent to end at NT$55.30, Mega Financial Holding Co. close unchanged at NT$30.90, and Cathay Financial Holding Co. gained 2.89 percent to end at NT$42.70.
"Today's expanded turnover showed many investors were willing to chase prices. And the gains helped the Taiex overcome stiff technical resistance at around 10,840 points, so the main board has become technically healthier," Chen said.
"The Taiex could soon challenge technical hurdles at around 11,097 points, the intraday high on May 30," Chen added.
Source: Focus Taiwan News Channel