Taipei-Shares in contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) extended momentum from a session earlier to hit a new high amid optimism at the company's fundamentals in the mid-morning trading session Tuesday, also pushing the stock's market capitalization to a record level, dealers said.
TSMC, along with other tech heavyweights such as iPhone assembler Hon Hai Precision Industry Co., steamed ahead to push up the local main board, although uncertainty over global trade still concerns global financial markets, they said.
As of 10:45 a.m., shares in TSMC, the most heavily weighted stock on the local market, had gained 0.64 percent at NT$313.00 (US$10.26) with 13.36 million shares changing hands on the Taiwan Stock Exchange, where the weighted index was up 0.25 percent at 11,628.63 points.
Soon after the local equity market opened, TSMC shares attracted strong buying to hit NT$312.50 and momentum continued. The gains boosted TSMC's market cap to a new high of NT$8.12 trillion, up from NT$8.06 trillion at the close of Monday.
"I think the current buying in TSMC largely came from foreign institutional investors as they keep moving funds into regional markets," said MasterLink Securities analyst Tom Tang. "What they do when moving funds to Taiwan is to pick up market heavyweights with healthy fundamentals, and TSMC is one of their top choices."
On Monday, foreign institutional investors bought a net 1.8 million TSMC shares after net sales of about 4 million in the two previous sessions. The change to net purchases showed the willingness of foreign institutional investors to hold TSMC shares, Tang said.
"Foreign institutional investors have a more than 70 percent stake in TSMC, which delivers good earnings and pays fat cash dividends. The stock is very attractive to foreign institutional investors," Tang said.
According to the TWSE, foreign institutional investors owned a 78.65 percent stake in TSMC as of Monday, which means almost 80 percent of TSMC's cash dividends will go to foreign investors. Last week, a TSMC board meeting approved a plan to issue a NT$2.5 cash dividend per share on its earnings for the third quarter after approving cash payouts of NT$2 and NT$2.5 per share on its earnings in the first and second quarters, respectively.
At an investor conference in mid-April, Lora Ho (???), TSMC's former chief financial officer, said she expected the cash dividend per share issued on earnings for 2019 as a whole to be no less than NT$10.
"TSMC's dividend yield hits 3-4 percent so buying the stock is expected to deliver a return better than bank deposits. It is a good investment," Tang said.
The gains posted by TSMC helped the local main board offset worries over trade friction between the United States and China for the time being, she added.
A CNBC report cited a government source saying overnight that Beijing is pessimistic about a trade deal after U.S. President Donald Trump said there would be no tariff rollback.
"Buying in TSMC encouraged investors to pick up other large tech stocks to lend additional support to the broader market," Tang said.
Among them, shares in Hon Hai, the second largest stock in terms of market cap, had risen 1.55 percent to NT$91.90 as of 10:45 a.m. as investors embraced the hopes that the company will benefit from the launch of the next generation 5G iPhones next year."
Source: Focus Taiwan News Channel