Taiwan shares plunge amid escalation of COVID-19

TAIPEI (CNA)— Taiwan shares came under heavy pressure Monday morning as market sentiment was spooked by a plunge in futures on the United States markets amid growing concerns about the COVID-19 coronavirus pandemic, dealers said.

Large-cap stocks remained the focus of Monday’s sell-off, led by the bellwether electronic sector, but government-led funds and the National Stabilization Fund were believed to have entered the trading floor, helping the main board to recover somewhat from an early low, dealers said.

As of 10:22 a.m., the weighted index on the Taiwan Stock Exchange (Taiex) had dropped 343.24 points, or 3.72 percent, to 8,890.85, off an early low of 8,750.14. Turnover at that point totaled NT$68.90 billion (US$2.26 billion).

The local main board opened down 2.26 percent in a knee-jerk reaction to the losses on the Dow Jones Industrial Average futures, which fell by the down-limit of 5 percent at one point, dealers said.

The drop in futures on the U.S. market signaled a poor start to the spot market Monday, after the U.S. Senate on Sunday failed to gain a procedural vote on a massive stimulus package aimed at alleviating the impact of the COVID-19, dealers said.

On the Taiex, selling on the main board resulted in an almost 500-point drop at one point Monday morning, with tech heavyweights bearing the brunt, before some bargain hunting emerged, helping the index to recoup some of its early losses, dealers said.

“I think government-led funds, and even the stabilization fund, are picking up bargains in a bid to prevent the Taiex from falling further right now,” Hua Nan Securities analyst Kevin Su said.

In a hearing of the legislative finance committee Monday, Finance Minister Su Jain-rong (蘇建榮) reiterated that the stabilization fund is ready to step in amid the volatility caused by rising concerns over the spread of the coronavirus.

On Thursday, the government authorized the activation of the NT$500 billion stabilization fund to shore up the market, as equities worldwide continued to be battered by fears of a global economic recession due to the COVID-19 pandemic.

“The Taiex’s lowest level so far today was around 8,750, which was higher than the intraday low of 8,523 points on March 19,” Su said. “I think that is a positive technical development.”

The electronics sector, which took a hard hit in the selloff, was down 3.47 percent as of 10:22 a.m., he said.

In the tech sector, contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock on the local market, had fallen 4.44 percent to NT$258.00 after hitting a low of NT$252.00.

iPhone assembler Hon Hai Precision Industry Co., second only to TSMC in terms of market capitalization, had dropped 4.38 percent to NT$67.70, and Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., was down 2.80 percent at NT$3,475.00.

“In addition to the coronavirus epidemic, the worry among many investors is about falling international crude oil prices due to tensions between Saudi Arabia and Russia, which could lead to sovereign wealth funds in oil producing countries dumping equities for cash,” Su said.

Amid the weakness of the global energy market, Formosa Petrochemical Corp. had dropped 1.68 percent to NT$70.30, Formosa Plastics Corp. had fallen 3.05 percent to NT$66.70, and Formosa Chemicals & Fibre Corp. was down 4.92 percent at NT$61.90 as of 10:22 a.m.

“The performance of the local main board will depend fully on the stability of the global equity markets, which will dictate whether foreign institutional investors will stop dumping Taiwanese stocks,” Su said.

Since the beginning of the year, foreign institutional investors have sold a net NT$500 billion worth of shares on the local main board.