TSMC, UMC shares take a tumble

Shares of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電) fell yesterday after a newspaper reported the chipmakers' plan to cut capital spending next year as they prepare for slowing demand.

Both chipmakers said they hadn't decided on next year's spending budget. TSMC, the world's largest maker of chips designed by other companies, declined 2.3 percent, its biggest drop in two months. UMC, TSMC's nearest rival, fell 4.5 percent to its lowest close since 2003.

Investments by TSMC and UMC can help investors gauge the outlook for the technology industry as the chipmakers make products that go into computers, mobile phones and consumer electronics. The Chinese-language Economic Daily News on Wednesday said that UMC will cut capital spending by 27 percent next year and TSMC by 17 percent.

"A spending cut signals they are bearish on demand," said Robyn Hsu (許家豪), who owns TSMC shares amid the US$152 million he helps manage at Truswell Securities Investment Trust Co (富鼎投信). "If demand slows, revenue and profit will also fall."

Hsu expects the companies will cut spending next year.

UMC is expected to cut capital expenditure next year to US$800 million, the newspaper reported, without citing anyone. TSMC will cut spending to US$2.2 billion, according to the report.

"We have not made any decisions on next year's capex," UMC spokesman Sandy Yen (顏勝德) said.

The company's spending for this year is still expected to be as much as US$1.2 billion, Yen said, repeating an August forecast.

TSMC hasn't determined its capital spending plan for next year, spokesman Tzeng Jin-hao (曾晉皓) said. The chipmaker said in August that it will spend between US$2.6 billion and US$2.8 billion this year.

Meanwhile, Cathay Financial Holding Co (國泰金控), the nation's biggest financial services company, fell in Taipei after earlier rising to an 11-week high on quarterly profit that tripled as fewer customers defaulted on credit-card repayments.

Cathay Financial shares rose as much as 2.3 percent to NT$85.90, their highest since July 26, before closing 0.2 percent lower at NT$83.80. The stock has gained 18 percent over the past month.

"Although Cathay Financial's profit surged, it has been mostly discounted as it reports unaudited profits every month," said Michael On (洪瑞泰), who invests the equivalent of US$100 million as managing director at Beyond Asset Management Co (晉昂證券投顧).

Trading became volatile in the afternoon and some investors moved funds to shipping stocks from financial institutions after cargo rates rose, On said.

Cathay Financial chief strategy officer Lee Chang-ken (李長庚) said he did not know why the shares declined.

Net income at the Taipei-based company, which owns Taiwan's largest life insurer, rose to NT$12.2 billion (US$374 million) from NT$4.09 billion a year earlier. Earnings were calculated by subtracting the company's first-half results from unaudited nine-month figures.

"Cathay Financial wasn't as seriously hurt in the credit-card crisis as other companies," said Kevin Yang (楊師銘), chief investment officer at Paradigm Asset Management Co (華頓投信), which oversees US$360 million in assets in Taipei. "I remain optimistic on its outlook through next year."