Turnover remained low amid lingering cautious sentiment as many investors remained wary of a possible interest rate hike by the U.S. Federal Reserve later in the year after Fed Chairwoman Janet Yellen said over the weekend that the U.S. economy had strengthened, dealers said.
The weighted index on the Taiwan Stock Exchange ended down 21.55 points, or 0.24 percent, at 9,110.17, after moving between 9,027.35 and 9,136.42. Turnover totaled NT$64.83 billion (US$2.04 billion) during the session.
The market opened down 0.16 percent and fell more than 1 percent to the day's low, as investors took cues from the Taiwan dollar's drop against the U.S. dollar on fears of a rate hike by the Fed, dealers said. At the end of the morning session, the Taiwan dollar was down NT$0.117 at NT$31.789, the lowest in a month.
As the index moved closer to the 9,000 point level, however, bargain hunting emerged, particularly in the financial sector, helping the broader market recover most of its early losses and end above 9,100 points, dealers said.
"The heavy losses suffered by the Taiwan dollar scared away many equity investors who are worried that the Fed will raise its key interest rates, most likely at its December policymaking meeting, in light of Yellen's remarks," Ta Ching Securities analyst Andy Hsu said.
"A lower Taiwan dollar means foreign investors have been moving funds out of the country, the last thing equity investors want to see."
Addressing the annual central bankers' meeting in Wyoming on Friday, Yellen said the U.S. economy has been solid and an interest increase is likely just ahead. She said that the case for a rate hike has gained strength "in recent months."
But Hsu said the local main board remained resilient after recovering from an early low on the back of a rising financial sector.
"Since the weighted index closed above the 9,100 point mark, the market technically has not yet weakened," he said.
Outperforming the broader market, the financial sub-index closed up 0.35 percent on bargain hunting due to its relatively low valuation, dealers said.
In the financial sector, Shin Kong Financial Holding Co. rose 5.95 percent to close at NT$7.12, and Fubon Financial Holding Co. gained 2.38 percent to end at NT$43.00, while Mega Financial Holding Co., which remained haunted by a money laundering scandal, fell 0.23 percent to close at NT$22.00.
"It's possible that foreign institutional investors stayed on the buy side of the financial sector in a bid to boost the spot market to profit in futures," Hsu said.
As of Friday, foreign institutional investors had bought a net 80,000 long position contracts in the futures market, Hsu said.
The bellwether electronics sector ended down 0.27 percent after Taiwan Semiconductor Manufacturing Co., the most heavily weighted stock on the local market, fell 0.28 percent to end at NT$176.50.
Also in the electronics sector, smartphone camera lens supplier Largan Precision Co. fell 0.69 percent to close at NT$3,615.00 but remained the most expensive stock in Taiwan, and flat panel maker AU Optronics Co. shed 2.33 percent to end at NT$12.55.
Bucking the downturn in the high-tech sector, integrated circuit packaging and testing services provider Advanced Semiconductor Engineering Inc. rose 0.65 percent to close at NT$38.85 after its chairman Jason Chang bought almost NT$1.3 billion worth of the stock Aug. 17-26 to boost his holdings. (By Frances Huang)