The latest domestic fuel price hikes has dampened market sentiment, sending local share prices lower amid fears that the higher fuel prices will have an adverse impact on local economic growth, dealers said yesterday.
Selling focused on large cap stocks, which dragged down the broader market below the 7,900-point mark at the end of the session as investors used the fuel price increases as an excuse to lock in the gains they have built up in recent trading sessions, they said.
The weighted index closed down 70.10 points, or 0.88 percent, at 7,862.90, on turnover of NT$68.48 billion (US$2.32 billion).
Turnover dropped further as many investors preferred to stay on the sidelines, weighing whether the market would encounter further downward pressure ahead of strong technical resistance at about 8,000 points, they said.
“The fuel price hikes simply gave investors a good reason to cut their holdings and pocket their gains after a recent strong showing,” Mirae Asset Management analyst Arch Shih (施博元) said.
The Ministry of Economic Affairs announced the removal of a mechanism to partially freeze domestic fuel prices on Sunday. The move has raised local gasoline prices by between 7 and 11 percent, effective yesterday, the highest one-time jump since 2008.
According to the ministry, the increases in fuel prices are expected to boost local consumer prices by 0.37 percentage points and cut economic growth by 0.22 percentage points.
“I am not surprised at all that the local bourse moved lower in a knee-jerk reaction to the fuel price hikes,” Shih said. “However, the silver lining was that selling pressure was limited, based on the reduced trading volume.”
“I suspect many foreign institutional investors are still in the local bourse, keeping their holdings. So, the market remains awash in ample liquidity,” the analyst said, referring to the 0.24 percent gain posted by Taiwan Semiconductor Manufacturing Co (台積電), which is one of the foreign investors’ favorites.
Shih said he expected the local bourse to continue to fluctuate between 7,800 points and 8,100 points in the near term unless the market encountered further shocks.
The plastics and chemical sector suffered the heaviest losses among the eight largest sectors of the market, finishing down 1.4 percent. Textiles shed 1.2 percent, construction stocks fell 1.0 percent and the foodstuffs, financial, machinery and electronics sectors closed down 0.9 percent.
Cement shares lost 0.7 percent, and the pulp and paper sector closed down 0.6 percent.
Among the losing market heavyweights, Hon Hai Precision (鴻海精密), the world’s largest contract electronics maker, fell 3.06 percent to close at NT$111.00, Nan Ya Plastics (南亞塑膠) lost 2.1 percent to end at NT$65.3 and Formosa Plastics (台塑) closed down 1.96 percent at NT$85.2.