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Oil prices continue to stoke fears on demand and profits

Share prices closed 1.67 percent lower yesterday in reduced turnover following Wall Street's weakness, with sentiment undermined by a continued spike in oil prices, dealers said.

They said oil prices have raised worries about their negative impact on the global economy and bellwether electronics stocks took their lead from their US counterparts on fears that oil prices might hit demand and profit margins.

The TAIEX closed down 105.77 points at 6,245.13, on turnover of NT$76.46 billion (US$2.4 billion).

"The oil price hikes have heightened worries about inflation and manufacturing costs," said Frank Lin, senior vice president with Fubon Securities Corp (富邦證券).

As a result, uncertainty about how high oil prices will go and their impact on manufacturing costs are weighing on sentiment.

"That lead is particularly harmful for Taiwan, given the nation's heavy reliance on exports," Lin said.

Analysts said the benchmark index will likely fall further as the index's August futures traded will be settled on Thursday.

Taiwan Semiconductor Manu-facturing Co (台積電) closed down 1.12 percent at NT$53, as weakness in its American Depositary Receipt (ADR) shares outweighed a Chinese-language newspaper report that the leading wafer foundry has secured an order from China's Hisense Electric Co (海信) for digital signal processing (DSP) chips. Hisense estimates its orders for TSMC this year will exceed one million chips, to be used in televisions, the newspaper said.

TSMC declined to comment on the report.
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