TSMC under pressure on ADR fall, but Taiex gains ground

CNA file photo

TAIPEI (CNA) — Shares of contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) came under pressure Wednesday but the broader market was holding its own as buying rotated to old economy and financial stocks, dealers said.

As of 11:04 a.m., TSMC shares had fallen 1.95 percent to NT$426.50 (US$14.56) on the Taiwan Stock Exchange (TWSE), where the benchmark weighted index was up 0.16 percent at 12,606.54. Led by TSMC, the bellwether electronics sector was down 0.55 percent.

TSMC shares were hit by selling soon after the market opened in response to a 7.6 percent fall in its American depositary receipts (ADRs) overnight, and the weakness continued into the morning, dealers said.

“TSMC had soared in recent sessions, so investors seized on the ADR fall as an excuse to lock in their earlier gains,” MasterLink Securities analyst Tom Tang said. “The losses were technical in nature.”

“I’m not worried about a major pullback of TSMC shares. The company’s fundamentals are sound because of its lead over its peers in high-end processes, including 7 nanometer, 5nm and even 3nm processes,” Tang said.

Tang said optimism over TSMC’s operations grew after the company’s investor conference on July 16, when the chipmaker gave strong guidance for the third quarter and all of 2020.

At the conference, TSMC said its sales for the third quarter are forecast to grow 9.3 percent from a quarter earlier, beating an earlier market estimate of a 3-5 percent increase. For 2020, TSMC has raised its sales growth forecast to more than 20 percent from the previous estimate of 14-19 percent.

“So I expect the corrections will not last long, and it is possible that when TSMC shares move lower to come closer to the NT$400 level, buying will emerge on active bargain hunting,” Tang said.

As for the Taiex, Tang said the market remained awash in liquidity, which has triggered rotational buying.

“TSMC took a break today, and buying rotated to non-tech stocks, helping the broader market move above the previous closing level,” Tang said.

Among the gaining old economy stocks, Formosa Plastics Corp. had risen 2.33 percent to NT$79.10 and Eclat Textile Co. had added 4.46 percent to NT$339.50 as of 11:04 a.m.

In the financial sector, Mega Financial Holding Co. had gained 1.90 percent to NT$32.25, and Cathay Financial Holding Co. had risen 0.88 percent to NT$44.00.