US stocks, especially technology shares, will move the local equity market in the near term, as the approach of tax season in Taiwan and the effect of the traditional slow season in the electronics industry might cap the upturn in the TAIEX, equity strategists said.
Market sentiment might also take cues from corporate earnings results this week, with investors seeking insight into the strength of technology companies as questions arise about their business prospects and stock valuations, they said.
The TAIEX closed down 1.75 percent at 10,779.38 points on Friday last week for a weekly loss of 1.7 percent, as weakness in technology shares, especially Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), dragged heavily on local equities and pushed the TAIEX below the six-month moving average of 10,792 points.
TSMC, the world’s largest contract chipmaker and a major chip supplier to Apple Inc, on Thursday gave a downbeat second-quarter sales growth forecast, citing soft demand for high-end smartphones.
The firm’s forecast on Friday sent its shares down 6.34 percent in Taipei trading, their steepest one-day decline since 2013, putting pressure on shares in other regional smartphone and electronic component makers.
TSMC’s disappointing sales forecast has increased uncertainty in technology shares in the second quarter, as the company is the semiconductor industry’s benchmark and a heavily weighted stock in the local market, Franklin Templeton SinoAm High-tech Fund manager Kuo Hsiu-shen (郭修伸) said in an investment note on Friday.
The stock’s continued weakness could prove a harbinger of a coming stock market slump, Kuo said.
Next week will see dozens more companies report their first-quarter bottom-line figures, including Alphabet Inc, Facebook Inc, Amazon.com Inc, Intel Corp and Microsoft Corp in the US. Apple, whose shares tumbled 4.1 percent on Friday in New York trading, is to release its financial results on Tuesday next week.
In Taiwan, several heavyweight companies — including Win Semiconductors Corp (穩懋), Powertech Technology Inc (力成科技), United Microelectronics Corp (聯電), AU Optronics Corp (友達光電), Macronix International Co (旺宏電子), MediaTek Inc (聯發科) and Chunghwa Telecom Co (中華電信) — are to release quarterly earnings results this week.
It was inevitable that the local stock market would see a downward correction in recent sessions due to worries over muted demand for high-end smartphones and cryptocurrency mining, as well as uncertainty about corporate earnings and the effects of a potential trade war, Allianz Global Investors Taiwan Technology Fund manager Peter Liao (廖哲宏) said.
However, in the long term, the market should return to an upward trend, buoyed by increasing demand for automotive electronics, and Internet of Things and artificial intelligence (AI) applications, which will continue to support the growth momentum of the wider technology industry, Liao said in a note on Friday last week.
Looking ahead, Liao said investors should pay close attention as Taiwanese suppliers ramp up production of Apple’s new iPhones and track how supply-chain firms react to tight supply in the semiconductor silicon wafers and passive components markets.
In the medium to long term, investors should also keep an eye on companies involved in AI, automotive electronics, cloud servers and 3D sensing industries, he said.
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