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Lack of economic confidence pounds Taiwan shares

Lack of economic confidence pounds Taiwan shares

Taipei, Aug. 19 (CNA) Shares in Taiwan took a beating Wednesday, with the weighted index even briefly falling below the 8,000 mark, as investors' confidence in future market movement was eroded by concerns over economic fundamentals, dealers said. The financial sector led the downturn amid fears that the weakness of the Chinese yuan will drag down the value of local financial institutions' yuan-denominated assets, while Taiwanese suppliers to Apple Inc. faced heavy losses to place downward pressure on the bellwether electronics sector, they said. The weighted index on the Taiwan Stock Exchange closed down 155.38 points, or 1.9 percent, at 8,021.84, a new low in two years, after moving between 7,987.57 and 8,182.81 on turnover of NT$98.64 billion (US$3.04 billion). The market opened up 1.31 points and rose to the day's high on a mild technical rebound from a session earlier, but selling soon followed as large-cap stocks, in particular in the financial and electronics sector, came under heavy pressure to send the weighted index into a tailspin, dealers said. With no signs of any immediate rebound, the weakness of the broader market lasted into the end of the session as the sell-off in major financial and high-tech stocks continued, they said. "The sell-off reflected a lack of confidence in the local economy after the government downgraded its forecast of the country's 2015 gross domestic product (GDP) growth rate (last week)," Concord Securities analyst Kerry Huang said. The government trimmed Taiwan's GDP growth to 1.56 percent from a previous estimate of a 3.28 percent, catching the market off guard. Huang said that what was even scarier was that Taiwan's GDP for the third quarter is expected to grow only 0.1 percent from a year earlier, coming closer to zero growth, according to the government's updated estimate. "Economic concerns have sparked heavy selling in the local equity market. After a recent heavy downturn, many investors have lost their faith so it was no surprise that they rushed to cash out of the stock market and run for the moment." Huang said. The financial sub-index closed down 2.88 percent. Among the losing financial stocks, Fubon Financial Holding Co. (???) lost 2.53 percent to close at NT$50.10, Cathay Financial Holding Co. (???) fell 2.57 percent to end at NT$43.65, and SinoPac Financial Holding Co. (???) shed 5.05 percent to close at NT$10.35. "To my knowledge, many local financial institutions have large exposures to China so a weakening yuan could cost them a lot. Even worse, volatility in the China equity market is expected to hurt them further as they own a large chunk of Chinese securities," Huang said. Among the falling "Apple concept stocks", smartphone camera lens supplier Largan Precision Co. (???) fell 4.01 percent to close at NT$2,875.00, and metal casing maker Catcher Technology Co. (??) lost 1.73 percent to end at NT$340.00. "It seemed to me that investors do not have high hopes that the launch of the next iPhone models, likely in September, will boost these Apple suppliers' shipments," Huang said, adding that some market analysts have even anticipated that the upcoming iPhone models will underperform their predecessors. Despite its downturn, Taiwan Semiconductor Manufacturing Co. (TSMC, ???), the most heavily weighted stock in the local market, fell only 0.79 percent to close at NT$125.00, outperforming the entire electronics sector, which ended down 1.77 percent. "I do not rule out the possibility that government-led funds bought into TSMC shares today in a bid to prevent the weighted index from falling further," Huang said. "The stock has been oversold and become cheap. That's why bargain hunters were willing to pick it up today," he said. (By Frances Huang)


Updated : 2021-09-28 16:19 GMT+08:00