Taipei- Shares in Taiwan closed only slightly higher Monday even though the United States and China agreed to a phase-one agreement to resolve their trade dispute, dealers said.
Investors grew cautious as the weighted index on the Taiwan Stock Exchange (TWSE), the Taiex, moved closer to the psychologically important level of 12,000 points.
Some were unwilling to chase prices higher while others started to unload their holdings in select large tech stocks to lock in earlier gains, dealers said.
The Taiex ended up 12.04 points, or 0.10 percent, at 11,939.77, after moving between 11,915.61 and 11,975.73, on turnover of NT$135.61 billion (US$4.49 billion).
The market opened down 0.10 percent in reaction to the lackluster performance of U.S. markets Friday. The Dow Jones Industrial Average finished flat as investors cashed in some of their holdings on news of the trade deal between Washington and Beijing, dealers said.
The Taiex regained its footing early in the day but moved in a narrow range during the rest of the session as large cap stocks, including Taiwan Semiconductor Manufacturing Co. (TSMC), came under pressure, they said.
"Recent strong gains on the stock market largely reflected the hopes of a trade deal between the top two economies," Concord Securities analyst Kerry Huang said.
"Investors just took a break after the news came out, locking in gains as the positive leads in the trade issue were factored in."
On Friday, China and the U.S. announced that they have reached a phase one trade deal that includes some tariff relief provided by each side, an increase in agricultural purchases by Beijing, and a structural change in intellectual property and technology issues.
The two sides are scheduled to sign a formal agreement next month before entering into second phase talks.
"More importantly, after recent solid gains, the Taiex has moved closer to the psychologically important level of 12,000 points. That stopped many investors from chasing prices amid fears over a technical pullback," Huang said.
Foreign institutional investors showed a greater appetite for risk, however, and continued to move funds into the region. Their buying had already helped the Taiex soar 1,098.05 points, or 10.14 percent, since the start of the fourth quarter.
"The Taiex has technically peaked for the moment and now is falling into consolidation mode with only small fluctuations," the analyst said.
Huang said a falling TSMC, which had driven the upturn on the broader market in recent sessions, provided more evidence that the Taiex was consolidating ahead of 12,000 points.
TSMC, the most heavily weighted stock in Taiwan, fell 0.88 percent to close at the day's low of NT$336.00, with 33.44 million shares changing hands.
Ahead of Monday's fall, the stock had jumped 24.63 percent since the beginning of the fourth quarter.
Also in the tech sector, Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., lost 0.10 percent to close at NT$4,835.00, and Catcher Technology Co., a metal casing maker for Apple's products, dropped 0.82 percent to end at NT$242.00.
However, iPhone assembler Hon Hai Precision Industry Co. rose 0.60 percent to close at NT$91.60, integrated circuit designer MediaTek Inc. gained 2.20 percent to end at NT$442.00, and memory chip manufacturer Nanya Technology Corp. added 4.02 percent to close at NT$82.80.
Non-tech stocks were mixed.
Among old economy stocks, food brand Uni-President Enterprises Corp. fell 0.28 percent to close at NT$72.30, while Formosa Plastics Corp. ended unchanged at NT$96.80 and Formosa Chemicals and Fibre Corp. rose 0.23 percent to close at NT$87.10.
In the financial sector, which ended down 0.24 percent, CTBC Financial Holding Co. lost 0.28 percent to close at NT$22.30, and Cathay Financial Holding Co. lost 1.17 percent to end at NT$46.60.
"While a technical pullback is possible, liquidity from foreign fund inflows is expected to protect the Taiex from falling below 11,850, which is above the 5-day moving average," Huang said.
According to the TWSE, foreign institutional investors bought a net NT$2.08 billion in shares on the market Monday after a net buy of NT$15,94 billion a session earlier .
Source: Focus Taiwan News Channel