TAIPEI (CNA) — Taiwan shares came under pressure Monday morning, after the U.S. Federal Reserve lowered its key interest rates a second time in 15 days, raising concerns over the deterioration of the economy at a time of escalating novel coronavirus disease COVID-19 contagion worldwide, dealers said.
As of 10:51 a.m., the benchmark weighted index on the Taiwan Stock Exchange, or the Taiex, had fallen 187.72 points, or 1.85 percent, at 9,941.15 on turnover of NT$102.37 billion (US$3.39 billion).
“After the Fed’s rate cut, futures on the Dow Jones Industrial Average fell more than 1,000 points, pointing to a possible ugly beginning on the spot market later in the day,” Dayu International Securities Investment Consultant analyst Chang Chih-cheng said.
“The surprise rate cut prompted investors at home and abroad to think the adverse impact from the virus spread will be heavier than expected, which triggered the Fed to take more quick action,” Chang said.
On Sunday, the Fed announced lower interest rates by 1 percentage point and launched a new round of quantitative easing by injecting US$700 billion into the market.
“The Fed’s action is necessary as a preemptive step to prevent any systematic liquidity risks in the banking industry, a positive development to the economy in the longer term,” Chang said. “But for now, the equity markets around the region, including Taiwan, just moved lower in a knee-jerk reaction to the rate cut.”
Chang said selling focused on large cap stocks nearly across the board amid worries over the global economy.
Contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock on the local market, faced selling and was down 1.72 percent at NT$285.00 with 42.40 million shares changing hands as of 10:51 a.m.
Also in the tech sector, iPhone assembler Hon Hai Precision Industry Co., second to TSMC in terms of market capitalization, dropped 2.82 percent to NT$72.50, and Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc. shed 3.94 percent at NT$3,900.00.
In the old economy sector, Nan Ya Plastics Corp. had lost 2.93 percent at NT$59.60, and Formosa Petrochemical Corp. dropped 3.57 percent to NT$70.30 amid worries over falling crude oil prices.
“Selling is likely to continue on the local main board, but I expect government-led intervention to lend support in a bid to prevent the Taiex from falling further,” Chang said.