Sun, Jul 21, 2019 - Page 14 News List

TAIEX rises on hopes of Fed rate cut

HEAVYWEIGHT:Buying focused on the electronics sector, with TSMC gaining 1.97 percent, enough to contribute to an increase of about 50 points to the local bourse

Staff writer, with CNA and AFP

Local shares on Friday finished higher after getting a boost from rising hopes that the US Federal Reserve would cut interest rates in the near future, dealers said.

Buying focused on the bellwether electronics sector, led by contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which gave a better-than-expected sales forecast for the third quarter, while old economy and financial stocks appeared mixed, they said.

The TAIEX on Friday ended up 73.91 points, or 0.68 percent, at 10,873.19, after moving between 10,861.99 and 10,919.96, on turnover of NT$122.57 billion (US$3.95 billion). That was a 0.5 percent increase from a close of 10,824.35 on July 12.

The market opened up 0.58 percent as investors rushed to buy large-cap electronics stocks in reaction to a strong recovery overnight on the Dow Jones Industrial Average, which ended up 3.12 points after rebounding from an earlier 151.06-point decline, dealers said.

The Dow bounced back after New York Federal Reserve President John Williams said that the Fed should “act quickly” at a time when the economy was slowing, a clear appeal to lower interest rates.

He pointed to studies suggesting that when there are few stimulus options available, officials should “move more quickly than you otherwise might” rather than waiting “for disaster to unfold.”

TSMC, the most heavily weighted stock in Taiwan, led the early gains and even pushed the weighted index above 10,900 points, before some investors pulled back, limiting the day’s gains, dealers said.

“Since Williams is one of the voting members on the Federal Open Market Committee, his comments have strengthened market hopes that the Fed will lower its key interest rates at the end of this month, say, by 0.5 percentage points,” Hua Nan Securities Co (華南永昌證券) analyst Kevin Su (蘇俊宏) said.

The Fed has scheduled a policymaking meeting for July 30-31.

“Once the Fed lowers interest rates to send the US dollar lower, funds are expected to exit the US market, but enter regional markets, and markets including Taiwan could enjoy ample liquidity,” Su said.

Combined with the rate cut hopes, an upbeat sales forecast for the third quarter given by TSMC a day earlier led investors to pick up large-cap tech stocks, in particular in the semiconductor sector, he said.

TSMC rose 1.97 percent to close at NT$259, with 59.64 million shares changing hands, after the chipmaker said that it could post US$9.1 billion to US$9.2 billion in consolidated sales for the third quarter, which would be up 18 percent from the second quarter.

TSMC’s gains alone contributed to an increase of about 50 points to the TAIEX, and boosted the semiconductor subindex by 1.87 percent and the electronics sector by 1.16 percent.

Buying also spread to other IC stocks, with IC packaging and testing services provider ASE Technology Holding Co (日月光投資控股) up 4.14 percent to close at NT$70.40 and DRAM chipmaker Nanya Technology Corp (南亞科技) up 1.5 percent to end at NT$67.70.

Bucking the uptrend, Largan Precision Co (大立光), a supplier of smartphone camera lenses to Apple Inc, fell 0.24 percent to close at NT$4,140, off a high of NT$4,250, on profit-taking.

“As today’s market attention was largely drawn by TSMC and the semiconductor sector, many non-tech stocks seemed to fall off the radar,” Su said.

In the old economy sector, textile maker Far Eastern New Century Corp (遠東新世紀) fell 1.87 percent to close at NT$31.55, Formosa Plastics Corp (台灣塑膠) lost 0.49 percent to end at NT$101 and Formosa Chemicals & Fibre Corp (台灣化纖) dropped 0.31 percent to close at NT$96.50.

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