Shares in Taiwan moved lower Wednesday, extending losses from a session earlier, as investors were motivated to cut their holdings by Iran's bombing of an airbase in Iraq housing U.S. troops, dealers said.
While non-tech stocks largely felt the pinch resulting from the conflicts in the Middle East, government-led funds were said to pick up some electronics heavyweights, in particular contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), which limited the downturn by the end of the session, the dealers said.
The weighted index on the Taiwan Stock Exchange (TWSE), or Taiex, closed down 63.22 points, or 0.53 percent, at 11,817.10, after moving between 11,777.45 and 11,899.67 on turnover of NT$149.51 billion (US$4.97 billion).
The market opened down 0.52 percent in a knee-jerk reaction to the losses in U.S. futures, which plunged more than 170 points at one point, indicating an ugly opening in the U.S. spot market later in the day in the wake of the Tehran military action that was aimed at retaliating for Washington's killing of a top Iranian military leader last week, the dealers said.
Selling continued to push the Taiex below 11,800 points in the mid-morning session before bargain hunting emerged to vault the index back into positive territory in the late morning session by buying into large tech stocks, including TSMC, they added.
However, the Taiex continued to move lower as downward pressure returned in the afternoon session amid the geopolitical concerns, but still ended above the 11,800-point level, the dealers said.
"Judging from the resilient large-cap tech stocks, I think the bargain hunting largely came from government-led funds, as the government did not want to see further losses in the equity market before the presidential election," Ta Chan Securities Investment Consulting analyst Jerry Chen said.
"The best way for the government to support the stock market was to buy into stocks, like TSMC, at a time when foreign institutional investors were staying on the sell side," Chen said.
"The buying was aimed at fending off the impact resulting of the military conflicts in the Middle East," he added.
According to the TWSE, foreign institutional investors sold a net NT$1.23 billion-worth of shares on the main board Wednesday after a net sale of NT$9.82 billion the previous day.
TSMC, the most heavily weighted stock in the local market, closed unchanged at NT$329.50 off an early low of NT$325.00, with 37.51 million shares changing hands.
Chen said government-led funds also lifted other tech giants, with integrated circuit designer MediaTek Inc. up 1.06 percent to close at NT$430.50 off a low of MT$424.00, and Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., up 0.95 percent to end at NT$4,785.00 off a low of NT$4,670.00.
Largan has scheduled an investor conference for Thursday to detail the fourth-quarter results and give guidance for the current quarter.
Meanwhile, iPhone assembler Hon Hai Precision Industry Co., second to TSMC in terms of market capitalization, lost 2.92 percent to close at NT$86.50.
Buying from government-led funds helped the bellwether electronics sector to recoup part of its earlier losses, with the index down 0.35 percent to end at 518.38 off a low of 514.36.
Elsewhere, many old economy stocks also suffered losses throughout the session amid fears that geopolitical tensions will have an adverse impact on the global economy, Chen said.
Among them, Taiwan Pulp & Paper Corp. shed 3.59 percent to close at NT$21.50, Formosa Plastics Corp. lost 1.48 percent to end at NT$100.00, Nan Ya Plastics Corp. dropped 1.38 percent to close at NT$71.60, and food brand Uni-President Enterprises Corp. declined 1.09 percent to end at NT$72.60.
In the financial sector, which closed down 0.69 percent, Fubon Financial Holding Co. lost 1.08 percent to end at NT$45.80 and Cathay Financial Holding Co. fell 0.95 percent to close at NT$41.80, while Mega Financial Holding Co. ended up 0.33 percent at NT$30.70.
"I expect that the local equity market will face further volatility because of unfavorable external factors," Chen said. "In addition, uncertainty over Saturday's presidential election is also expected to affect market sentiment."
Chen said the nearest technical support level could be seen around 11,700 points.