Taiwan shares moved sharply lower Friday morning after the U.S. markets plunged overnight on growing fears over the spread of the novel coronavirus (COVID-19) in the United States, dealers said.
Investors scrambled to dump large cap stocks across the board, with the downturn led by tech heavyweights, such as contract chipmaker Taiwan Semiconductor Manufacturing Co., the most heavily weighted stock in the local market, they said.
As of 10:58 a.m., the benchmark weighted index on the Taiwan Stock Exchange (TWSE) or the Taiex, had fallen 169.29 points, or 1.47 percent, to 11,345.53 on turnover of NT$85.07 billion (US$2.84 billion).
"The market was battered by panic selling soon after it opened, as investors saw an almost 1,000 point dive on the Dow Jones Industrial Average overnight," Hua Nan Securities analyst Kevin Su said. The Dow plunged 3.58 percent Thursday.
"Market sentiment here was moved by a soaring VIX on the U.S. markets as investors at home and abroad feared the COVID-19 spread in the U.S., the largest economy in the world, will further affect the global economy."
The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), which is widely considered an ideal gauge of fear in the market, soared about 14 percent overnight.
The spread of the COVID-19, which originated in the Chinese city of Wuhan, has undermined production in China and interrupted global supply chains. The contagion could also hurt private consumption in the U.S.
Since the novel coronavirus first emerged at the end of December, more than 96,000 confirmed cases have been reported worldwide, with infections in more than 80 countries and territories and more than 3,300 deaths, the majority of which have been in China.
"Such unfavorable circumstances are expected to pose threats to Taiwan's export-oriented economy," Su said.
It was no surprise that Friday's selling in Taiwan focused on the bellwether electronics sector, which depends heavily on global demand, Su said.
As of 10:58 a.m., TSMC had lost 2.01 percent to NT$316.50 with 25.07 million shares changing hands after its American depositary receipts (ADRs) lost 2.37 percent on U.S. markets overnight.
Led by TSMC, the electronics sector was down 1.43 percent, and the semiconductor sub-index was down 1.76 percent.
Also in the high tech sector, iPhone assembler Hon Hai Precision Industry Co., second to TSMC in terms of market capitalization, had lost 1.93 percent to NT$81.10, while Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., was little changed at NT$4,600.00.
Following a 1.45 percent fall in its ADRs overnight, integrated circuit packaging and testing services provider ASE Technology Holding Co. had lost 2.99 percent to NT$71.40, while IC designer MediaTek Inc. had lost 1.17 percent to NT$380.50.
Selling was also seen among large cap old economy stocks with Formosa Plastics Corp. down 1.61 percent at NT$91.80 and Nan Ya Plastics Corp. down 2.15 percent at NT$68.20.
In the financial sector, Fubon Financial Holding Co. had fallen 1.88 percent to NT$44.30, and Cathay Financial Holding Co. had lost 1.37 percent to NT$39.60.
"The silver lining was that the magnitude of the fall in the local market was not as heavy as elsewhere in the world as the TWSE remained awash in liquidity and many investors appeared willing to park their money here," Su said.
"I expect the Taiex will see strong support at around the 240-day moving average of 11,049 points," Su said. "It's also possible that government-led funds will jump into the market to prevent further losses."