Local shares yesterday fell sharply, losing more than 100 points, as contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) came under heavy pressure due to a negative outlook for two of its major clients.
Selling also focused on other firms in Apple Inc’s supply chain after the US consumer electronics giant warned overnight that it was unlikely to meet its sales target because of an outbreak of COVID-19 in China.
The TAIEX closed down 114.53 points, or 0.97 percent, at 11,648.98. Turnover totaled NT$138.775 billion (US$4.61 billion).
The market opened down 0.53 percent shortly after it was reported that the US government was considering new restrictions against China that would limit Huawei Technologies Co’s (華為) use of US chipmaking equipment, as a way to cut off China’s access to key semiconductor technology.
Selling on the main board escalated as Apple suppliers took a beating, pushing the TAIEX even lower by the end of the session.
Apple and Huawei are major clients of TSMC.
“As TSMC shares plunged, investors rushed to dump other tech stocks amid worries that the stock would drag down the bellwether electronics sector and the broader market,” Tachan Securities Co (大展證券) analyst Jerry Chen said.
It is too early to say whether the US will impose further sanctions against Huawei as reported, as US chipmakers are expected to lobby against the proposal, he said.
Nonetheless, investors were pocketing their significant recent gains in TSMC based on the reports, he added.
TSMC shares fell 2.87 percent to close at the day’s low of NT$322, with its losses accounting for more than an 80-point drop on the TAIEX.
Among Apple suppliers, iPhone assembler Hon Hai Precision Industry Co (鴻海) lost 0.6 percent to close at NT$83.4 and Largan Precision Co (大立光), a supplier of smartphone camera lenses, slid 4.44 percent to end at NT$4,630.
“I think foreign institutional investors stood on the sell side today,” Chen said. “They have been cutting long position contracts in the futures market and wanted to take profit, as February contracts will be settled tomorrow.”
Foreign institutional investors sold a net NT$21.42 billion of shares on the main board yesterday, Taiwan Stock Exchange data showed.
“TSMC’s losses today put it closer to its nearest support point of NT$321, and if the stock cannot hold above that level, the TAIEX is expected to fall further,” Chen said. “In addition, the spread of the coronavirus is expected to continue to dictate market sentiment.”
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