Stocks jolted after slump on Wall Street and Tokyo

"A typical pattern for a bull market is a gradual upturn while seeing quick downswings."

Tu Jin-lung, Grand Cathay Investment Services Corp chairman

Share prices closed sharply lower in nervous trade yesterday, dropping 3.16 percent with sentiment first hit by Wall Street's losses overnight, then dragged down further by a massive slump in Tokyo, dealers said.

They said the bellwether technology sector led the fall following a slide in Intel Corp in US after-hours trade after the semiconductor giant reported lower-than-expected results.

The TAIEX lost 212.12 points at 6,498.92, on turnover of NT$133.23 billion (US$4.15 billion).

Foreign institutional investors sold a net NT$15.07 billion in Taiwanese stocks as part of their profit-taking in the region.

Grand Cathay Investment Services Corp (大華投信) chairman Tu Jin-lung (杜金龍) said Wall Street and Intel triggered investor caution in early trade, which was fueled further by the slide in Tokyo shares and local political concerns.

Concerns over a Cabinet reshuffle and future direction of economic policies following Tuesday's announcement by Premier Frank Hsieh (謝長廷) that he would resign weighed down the market further, he said.

He said these negative leads hit the market at a time when it was going through a corrective phase following a 1,000 point gain in the weighted index since late October.

Investors also took a cautious approach ahead of the Lunar New Year holiday. The stock market will be closed from Jan. 26 to Feb. 2.

Tu said a further correction could not be ruled out, but liquidity-driven buying could limit the possible downturn.

"A typical pattern for a bull market is a gradual upturn while seeing quick downswings," he said.

Taiwan Semiconductor Manu-facturing Co (TSMC, 台積電), the world's largest made-to-order chip supplier, fell after Intel forecast first quarter sales that disappointed analysts.

Intel said fourth-quarter profit rose 16 percent to US$2.45 billion. Sales rose 6.3 percent to US$10.2 billion, falling short of its projection. The company forecast first-quarter sales of between US$9.1 billion and US$9.7 billion, which may miss the lowest analyst estimate of US$9.5 billion.

TSMC stock fell 4.6 percent to NT$61.60, its biggest decline since June 11, 2004.

Shares in United Microelectronics Corp (UMC, 聯電), the world's second-largest made-to-order chipmaker, fell 4.8 percent to NT$17.85.

"Intel's poor forecast has affected how investors view the industry," said George Wu (吳裕良), who helps manage US$2 billion in assets, including shares of TSMC and UMC, at Invesco Taiwan Ltd (景順投信).

"It's a bad beginning," he added.

Asustek Computer Inc (華碩), the world's largest maker of boards that connect chips in personal computers, lost 5.6 percent to NT$101.5.

Hon Hai Precision Industry Co (鴻海), Taiwan's biggest electronics company by sales, declined 5 percent to NT$210.