Taiwan shares plunge amid U.S.-China trade concerns

People walk by a globe structure showing the United States of America on display outside a bank in Beijing, Monday, May 6, 2019. U.S. President Donald Trump raised pressure on China on Sunday, threatening to hike tariffs on $200 billion worth of Chinese goods in a tweet that sent financial markets swooning. Trump's comments, delivered on Twitter, came as a Chinese delegation was scheduled to resume talks in Washington on Wednesday aimed at resolving a trade war that has shaken investors and cast gloom over the world economy. (AP Photo/Andy Wong)

TAIPEI (CNA) — Shares in Taiwan fell nearly 2 percent on May 6 amid renewed concerns over trade friction between the United States and China after U.S. President Donald Trump on Sunday threatened another hike in tariffs on imported Chinese goods, dealers said.

Selling focused on large-cap stocks, especially in the electronics sector, led by contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) and iPhone assembler Hon Hai Precision Industry Co., the two stocks with the highest market capitalization in Taiwan.

The weighted index on the Taiwan Stock Exchange (TWSE), the Taiex, closed down 199.18 points, or 1.80 percent, at 10,897.12, after moving between 10,870.40 and 11,005.36. Turnover was NT$137.86 billion (US$3.36 billion).

The market opened down 0.82 percent in reaction to a plunge of about 500 points in the Dow Jones Industrial Average on Friday, pointing to a bad day for the spot market on Monday.

The plunge in the United States came after Trump tweeted that a punitive tariff of 10 percent currently imposed by Washington on US$200 billion worth of imported Chinese goods will increase to 25 percent Friday.

Seeing heavy losses in the Shanghai, Shenzhen and Hong Kong markets caused by Trump’s tariff tweet, investors in Taiwan rushed to dump more of their holdings in large cap stocks, sending the Taiex into a tailspin during most of the session, they said.

It closed at its lowest level since April 15, when the index ended at 10,857.60.

“Trump’s announcement came as a surprise to the market as many investors had thought Washington and Beijing would cut a deal later this month to resolve their trade disputes after both sides recently gave positive signals toward a deal,” Yong-Cheng International Securities Investment Consulting analyst Jerry Chen said.

In the same tweet, Trump also threatened to impose punitive 25 percent tariffs on an additional US$325 billion worth of imported Chinese goods “shortly,” indicating that the president may be losing his patience in the negotiations with China.

After Trump’s tariff hike message, international news media reported that China is mulling the possibility of canceling trade talks with the U.S. scheduled for later this week.

“Many investors are afraid that no deal between Washington and Beijing will hurt the world economy and global demand,” Chen said.

“Taiwanese exporters could be the victims under such an unfavorable scenario.” It was no surprise that Taiwan’s export-oriented tech sector led the broader market in trending lower, Chen said.

“Look at stocks like TSMC and Hon Hai. Their losses indicated that selling came largely from foreign institutional investors, which were behind those stocks’ gains in recent days. According to the TWSE, foreign institutional investors sold a net NT$13.96 billion in shares on the market Monday.

TSMC, the world’s largest contract chipmaker, fell 2.26 percent to close at NT$259.00, with 32.78 million shares changing hands.

TSMC’s losses alone sent the Taiex down about 60 points, and they also contributed to a 2.26 percent fall in the bellwether electronics sector.

Hon Hai, the world’s largest contract electronics maker, lost 3.74 percent to end at NT$84.90, and United Microelectronics Corp., another contract chipmaker, shed 4.69 percent to close at NT$13.20.

Bucking the downturn on the broader market, Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., rose 1.50 percent to end at NT$4,745.00 after going as high as NT$4,900.00.

The buying in Largan was triggered by its April consolidated sales, which totaled NT$5.009 billion, up 44 percent from a year earlier and also up 28 percent from a month earlier.

Non-tech stocks also appeared sluggish throughout the session, Chen said.

Formosa Petrochemical Corp. lost 2.16 percent to close at NT$113.00 and Asia Cement Corp. lost 1.77 percent to end at NT$41.60.

In the financial sector, which ended down 1.28 percent, Cathay Financial Holding Co. lost 2.09 percent to close at NT$44.50, and CTBC Financial Holding Co, fell 1.83 percent to end at NT$21.45.

“After today’s losses, the local market has become technically fragile, and market sentiment was hurt badly. I think more losses will follow for the Taiex, which will test 10,667, the intraday low since March 22,” Chen said.

By Frances Huang