Taipei, Shares in Taiwan came under heavy pressure Friday, falling nearly 2 percent on selling across the board amid concerns that the U.S. Federal Reserve will accelerate the pace of its interest rate hikes in the future, dealers said.
A CNN report saying the United States is planning a show of force in areas close to Chinese-claimed territory in the South China Sea and the Taiwan Strait also dampened market sentiment as investors feared regional tensions, they said.
Selling focused on large cap stocks, in particular in the bellwether electronics sector, while old economy stocks in the petrochemical and textile sectors also took a beating, pushing down the broader market, dealers said.
The weighted index on the Taiwan Stock Exchange (TWSE), the Taiex, closed down 201.79 points, or 1.88 percent, at 10,517.12, after moving between 10,446.94 and 10,669.63, on turnover of NT$148.80 billion (US$4.83 billion).
The market opened down 0.50 percent in reaction to a 0.75 percent fall in the Dow Jones Industrial Average and a 1.81 percent plunge in the tech-heavy Nasdaq overnight after the benchmark 10-year U.S. bond yield soared to above 3.2 percent, its highest level since 2011, dealers said.
Selling in Taiwan quickly escalated, with investors acting on the heavy losses suffered by high-tech stocks in the U.S. by dumping electronics heavyweights here, led by contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC).
Some bargain hunters emerged late in the trading session after the Taiex fell below 10,500 points to help the market recover slightly, but it still closed at its lowest level since May 3, when the Taiex finished at 10,514.18.
"The spike in the U.S. 10-year treasury bond yield has further raised concerns over a speedy rate hike by the Fed," Hua Nan Securities analyst Kevin Su said.
The expectations of faster rate hikes came after Fed Chair Jerome Powell said the U.S. central bank had a long way to go before interest rates hit neutral, suggesting to markets that more hikes could be on the horizon, Su said.
"While Taiwan's market was bothered by the U.S.'s reportedly planned show of force, I'm more concerned over the rate hike, which could lead to more funds flowing out of the region," Su said. "Falling liquidity bodes ill for stocks down the road."
Judging from Friday's higher turnover, which topped the average daily turnover of NT$111.9 billion in the previous five sessions, Su said many investors were trading in panic mode.
"Liquid large cap electronics stocks were the victims as investors simply wanted to hold more cash for the time being," Su said.
TSMC, the most heavily weighted stock in Taiwan, shed 1.57 percent to close at NT$250.00, with 40.16 million shares changing hands, after Morgan Stanley downgraded the global semiconductor sector.
Led by TSMC, the bellwether electronics sector closed down 2.14 percent.
Among other falling semiconductor stocks, United Microelectronics Corp., a smaller rival to TSMC, lost 2.65 percent to end at NT$14.70, and integrated circuit designer MediaTek Inc. fell 3.10 percent to close at NT$234.50.
Also in the electronics sector, Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., lost 7.28 percent to end at NT$3,440.00 amid continued worries over sales of the latest iPhones.
"With rate hike concerns dominating the market, the old economy and financial sectors also moved lower, while some bargain hunters jumped into the market to pick up financial stocks," said Su, who suspected the buying came from government-led funds.
In the old economy sector, Formosa Petrochemical Corp. shed 3.64 percent to close at NT$132.50, Formosa Chemicals & Fibre Corp. lost 2.82 percent to end at NT$120.50, and textile maker Far Eastern New Century Corp. fell 1.85 percent to close at NT$34.50.
Among financial stocks, CTBC Financial Holding Co. lost 1.09 percent to end at NT$22.70, off a low of NT$22.50, and Cathay Financial Holding Co. fell 0.97 percent to close at NT$51.20, off a low of NT$50.90.
"After today's plunge, the market has become technically weaker and there is no sign that the index will find immediate technical support anytime soon," Su said.
Source: Focus Taiwan News Channel