Technology stocks may temporarily lose their investment appeal following conservative forecasts by several global and domestic technology companies on prospects for the second half of the year, analysts said.
“Led by Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the local technology sector suffered a steep decline [yesterday] as market sentiment toward the sector turned sour,” Ta Ching Securities (大慶證券) analyst Andy Hsu said.
“With the tech sector taking a beating, it was not surprising that the broader market plunged,” Hsu said.
The TAIEX fell 1.62 percent, or 132.85 points, to close at 8,062.03 yesterday, posting the steepest decline among major stock markets in Asia. That compares with Shanghai’s 1.52 percent decline, Tokyo’s 1.48 percent fall and Seoul’s 0.22 percent retreat.
On a weekly basis, the benchmark index was off by 1.93 percent, Taiwan Stock Exchange (TWSE) data showed.
However, daily turnover expanded to NT$100.65 billion (US$1.61 billion) yesterday, from NT$92.2 billion on Thursday, marking the highest level in more than a week, data showed.
“Various global and domestic tech conglomerates hold a conservative view on business prospects in the second half of the year, which dragged the TAIEX further down,” Allianz Global Investors Taiwan (德盛安聯投信) fund manager Sunny Chung (鍾兆陽) said.
On Thursday, TSMC chairman and CEO Morris Chang (張忠謀) said that growth momentum is expected to slow this quarter as supply chain inventory climbs faster after sales of PCs and several smartphone models fell short of expectations.
TSMC’s forecast came a day after US chip giant Intel Corp lowered its forecast for PC sales for the year and revised downward its revenue forecast to flat, rather than its prior expectation of a slight growth.
Taiwan Stock Exchange data showed that foreign institutional investors remained net buyers of Taiwanese securities this week, but Chung said most foreign investors have shifted their focus to non-technology stocks.
That could lead to slower momentum for the technology sector, compared with the financial sector and non-technology stocks in the near term, he added.
Chung suggested investors switch their focus to the financial, plastics and telecom sectors for defensive plays.
Investors can also consider biotechnology stocks given the industry’s growing momentum, he added.
Prudential Financial Securities Investment Trust Enterprise Co (保德信投信) fund manager Bevan Yeh (葉獻文) shared Chung’s views, saying that growth drivers for the tech sector might be weak compared with financial and non-tech stocks.
However, investors could still keep a tab on smartphone-related stocks within the tech sector, Yeh said, adding that the launch of new products could offer some upside for these stocks.
Overall, the sluggish momentum of tech stocks could be a drag on the overall market, with the benchmark index hovering around 8,000 points, analysts said.
Citigroup Global Markets has set its year-end target for the TAIEX at 8,500 points in its latest macroeconomics report, citing Taiwan’s improving fundamentals after the signing of a new service trade agreement with China and better economic sentiment with the inking of an economic cooperation agreement with New Zealand.
Additional reporting by CNA