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Taiwan shares end slightly higher despite rate cut

Taiwan shares end slightly higher despite rate cut

Taipei, Sept. 25 (CNA) Shares in Taiwan closed slightly higher Friday as earlier gains were capped, although the central bank cut its key interest rates for the first time after a freeze for the past 16 quarters, to boost the local economy, dealers said. The electronics sector moved higher on hopes that an interest rate cut will pump more funds into the equity market, while the financial sector trended lower amid fears that a narrowing interest spread caused by the rate cut will hurt financial institutions' profitability, the dealers said. The weighted index on the Taiwan Stock Exchange ended up 9.25 points, or 0.11 percent, at 8,132.35, after moving between 8,061.87 and 8,152.50, on turnover of NT$70.71 billion (US$2.14 billion). The market opened up 0.20 percent and rose to the day's high after investors took cues from the interest rate cut by the central bank to buy into local shares, but with selling in the financial sector increasing, the index fell into negative territory before late-session buying in electronics heavyweights vaulted the broader market above the previous closing level, the dealers said. "The rate cut only provided an initial boost to share prices, and then investors started to question the timing of the reduction, speculating that the local economy is worse than the market had expected, which triggered the central bank's move," MasterLink Securities analyst Tom Tang said. In a quarterly policymaking meeting, the central bank trimmed its key interest rates by 0.125 percentage points, with the discount rate dropping to 1.750 percent, the rate of accommodations with collateral down to 2.125 percent, and the rate of accommodations without collateral reduced to 4.0 percent. "Investors dumped their financial holdings throughout the session as the interest rate cut will narrow the interest spread and hurt the sector's bottom line," Tang said, adding that selling focused on large-cap financial stocks, making it hard for the entire financial sector to move out of the doldrums. The financial sub-index closed down, with CTBC Financial Holding Co. (???) down 3.06 percent to end at NT$17.40, and Cathay Financial Holding Co. (???) down 2.71 percent to close at NT$44.85. "Late-trading buying in select high-tech stocks gave support to the broader market," Tang said. "Judging from the gains posted by these large-cap electronics stocks, I guess that the government-led funds stood on the buy side in a bid to prevent the index from falling into the red." The electronics sub-index ended up 0.42 percent and the semiconductor sub-index closed up 0.28 percent. Among the gaining high-tech stocks, Hon Hai Precision Industry Co. (??), an assembler of iPhones and iPads, rose 0.84 percent to close at NT$84.30, and Largan Precision Co. (???), a smartphone camera lens supplier to Apple Inc., gained 1.68 percent to end at NT$2,730.00. Underperforming the high-tech sector, Taiwan Semiconductor Manufacturing Co. (TSMC, ???), the most heavily weighted stock in the local market, closed unchanged at NT$127.00. "Sentiment remained cautious, dragging down today's turnover despite the rate cut," Tang said. "Many investors are still watching closely how global equity markets will perform before making their next moves." (By Frances Huang)