Share prices closed down 3.45 percent yesterday as institutional investors continued unloading large-cap high-tech stocks and judged that a rally prompted by improved ties with China had overvalued earnings prospects, dealers said.
The market opened down 1.33 percent amid continued profit-taking after a recent strong showing, dealer said.
The TAIEX fell 222.67 points to 6,225.56 on turnover of NT$112.63 billion (US$3.42 billion) — its biggest decline since April 17.
The TAIEX, the world’s worst performer this month, has given up about half the 24 percent gain since April 29, when Taiwan said it would let Chinese institutional investors apply to invest directly in shares and futures listed on its bourses.
The downside extended throughout the trade with pressure on the bellwether electronic sector on the rise, in particular on Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電), dealers said.
TSMC fell 4.82 percent to NT$53.30 after foreign brokerages downgraded the stock’s performance and UMC shed 6.78 percent to NT$11.
“Judging from the fall in the [New] Taiwan dollar against the US dollar, I suspect the selling largely came from foreign institutional investors,” President Securities (統一證券) analyst Steven Huang said.
Among other large-cap stocks, smartphone maker HTC (宏達電) lost 4.42 percent to NT$432 and flat panel manufacturer AU Optronics (友達) fell 4.05 percent to NT$33.20.
Hon Hai Precision (鴻海精密), which produces a wide variety of electronic goods, such as digital cameras and notebook computers, shed 4.75 percent to NT$96.20.
“The recent impressive upside was mainly boosted by high-tech stocks on foreign investors’ short covering. The selling was expected,” Huang said.
“A wise investor should avoid the electronics sector at the moment. More pressure is very likely,” he said.
Aside from high-tech stocks, selling also spread across the broader market as retail investors witnessed foreign institutional selling, dealers said.
“Today’s sell-off has made the market very technically unstable. If the market fails to hold itself above 6,100 point well, it is possible for the index to dip below 6,000 points in the short term,” Huang said.
Credit Suisse Group AG advised investors in a June 8 report to switch from Taiwan to Southeast Asia stocks as the region’s discount to Taiwan is among the largest on record.
Taiwanese equities are no longer “compelling,” Jonathan Neill, director at FPP Asset Management LLP, manager of the second-best performing Taiwan fund this year, said by e-mail last Wednesday, adding that the fund has reduced its investments in Taiwan.
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