While the broader market faced downward pressure for most of the session, select large-cap stocks in both the electronics and non-high tech sectors benefited from bargain hunting, which prevented the weighted index from falling further, dealers said.
The weighted index on the Taiwan Stock Exchange (TWSE) closed down 13.60 points, or 0.15 percent, at 8,987.55, after moving between 8,958.81 and 9,038.48. Turnover totaled NT$78.50 billion (US$2.48 billion) during the session.
The market opened up 0.16 percent and rose to the day's high on a mild technical rebound from the previous session, dealers said. As the weighted index moved closer to 9,100 points, however, selling emerged, pushing the broader market into negative territory until the end of the session, dealers said.
But market heavyweights such as contract electronics maker Hon Hai Precision Industry Co. and contract chip maker Taiwan Semiconductor Manufacturing Co. (TSMC) remained resilient, and the financial sector bounced back from its drop in the previous session to lend support to the index, dealers said.
"Looking at the thin turnover, it seems that many investors preferred to stay on the sidelines, waiting for clues on a possible interest rate hike by the U.S. Federal Reserve," Ta Ching Securities analyst Andy Hsu said.
"The upcoming jobs data could be a very crucial indicator so it was no surprise that today's trading was light."
Market worry over a U.S. interest rate hike has been mounting since last week when Fed Chairwoman Janet Yellen said "the case for an increase in the federal funds rate has strengthened in recent months" because the U.S. economy has been improving.
"If the August jobs data points to a better job market in the U.S., the interest rate worry may escalate, sending ripples through the financial markets," Hsu said.
He said the local equity market remained quiet ahead of the U.S. jobs data release, with the weighted index continuing to move between 8,900 and 9,100 points.
"Fortunately, foreign institutional investors still hold a large number of long position futures contracts," Hsu said. "I think they picked up large cap stocks today to prevent more losses on the spot market."
Among the market heavyweights, Hon Hai, which went ex-dividend Friday, doling out NT$1 in stock dividend and NT$4 in cash dividend, rose 1.85 percent to close at NT$77.20 with about 158.30 million shares changing hands. The trading volume was the stock's highest in 45 months.
TSMC, the most heavily weighted stock on the local market, gained 0.58 percent to end at NT$174.50, while integrated circuit designer MediaTek Inc. fell 2.19 percent to close at NT$245.50, and flat panel maker AU Optronics Corp. shed 2.89 percent to finish at NT$11.75.
In the financial sector, which closed up 0.54 percent, First Financial Holding Co. rose 1.54 percent to end at NT416.45, CTBC Financial Holding Co. gained 1.10 percent to close at NT$18.45, and Fubon Financial Holding Co. finished 0.91 percent higher at NT$44.55.
According to the TWSE, foreign institutional investors bought a net NT$407 million worth of shares on the main board Friday. (By Frances Huang)