Shares tumble, dragged down by electronics

The China Post news staff and CNA

TAIPEI, Taiwan — Taiwan stocks have had a devastating start to the Year of the Rabbit thus far. After the TAIEX closed lower Tuesday, the first trading day after the New Year break, it tumbled 1.14 percent yesterday, led by the bellwether electronics sector, which extended losses amid lingering concerns over a strong New Taiwan dollar, dealers said. The weighted index fell 104.64 points to 9,006.82, after moving between 8,992.64 and 9,129.88, on turnover of NT$145.30 billion. The three major institutional investors were all on the sell side, with foreign investors, investment trusts and securities firms net-selling NT$5.63 billion, NT$1.059 billion and NT$1.525 billion, translating into a total of NT$8.214 billion. The market opened up 0.19 percent and moved to the day’s high on a mild technical rebound from the previous session, but pressure emerged, particularly in high-tech stocks, because of the continued appreciation of the local currency against the U.S. dollar, dealers said.

Investors also engaged in profit-taking to lock in the strong gains posted by select old economy stocks in the previous session, they said.

Machinery and electronics sector shares suffered the heaviest pressure, falling 1.67 percent. Financial shed 1.1 percent, textiles fell 1.03 percent, cement stocks dropped 1.0 percent and the plastics and chemical sector closed down 0.48 percent.

In contrast, construction stocks rose 1.05 percent, foodstuffs gained 0.82 percent and the paper and pulp sector closed up 0.21 percent.

“I suspect the selling in electronics largely came from foreign institutional investors as they used a rising New Taiwan dollar as an excuse to dump these stocks to realize recent gains,” Horizon Securities analyst Benson Huang said.

Before electronics heavyweights, such as Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp., report their sales data for January, Huang said, market sentiment toward the high-tech sector is expected to remain cautious.

Huang said lackluster performances in other regional markets, such as Hong Kong and Shanghai, following the latest interest rate hikes by China also prompted investors to cut holdings in the local bourse.

China announced on Tuesday that it would raise key lending and deposit rates by 0.25 percentage points, marking the third rate hike in four months to fight inflation.

“After yesterday’s selling, the local market has become technically weak,” Huang said. “Further volatility is very likely over the next few sessions.”