Volatility in global equity markets sent shares in Taiwan sharply lower yesterday after foreign institutional investors aggressively sold their holdings throughout the session, dealers said.
Selling was seen across the board, but hit the electronics sector particularly hard.
In that sector, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the most heavily weighted stock in the local market, took a beating, while stocks in Apple Inc’s supply chain faced heavy downward pressure as the US consumer electronics giant reported lower-than-expected iPhone sales, dealers said.
Stocks in the old economy and financial sectors also felt the pinch of steep falls in global markets as investors locked in the gains posted in recent sessions ahead of the Lunar New Year holiday, they added.
The TAIEX closed down 198.09 points, or 2.34 percent, at 8,264.48, on turnover of NT$134.08 billion (US$4.43 billion).
The market opened down 2.03 percent as investors reacted to heavy losses on Wall Street and other regional markets during the Lunar New Year holiday, when the local bourse was closed, dealers said.
Downward pressure then accelerated to further drag down the index on investor fears that further volatility in global markets would continue to hurt the domestic market, they said.
“The sell-off showed fragile confidence in market prospects at home and abroad,” Mega International Investment Services Corp (兆豐國際商銀) analyst Alex Huang (黃國偉) said.
Huang said the latest sharp decline on Wall Street largely resulted from the Fed’s announcement on Wednesday last week that it would further reduce its monthly bond-buying program by US$10 billion a month and also from disappointing US manufacturing activity data.
The US Institute for Supply Management reported earlier this week that its purchasing managers’ index for last month fell to an eight-month low.
“Many investors have doubts about the global economic recovery; the latest US economic data still bothered the market. The first idea on their minds was to cut their holdings to pocket the gains they had posted previously,” Huang said.
Vice Minister of Finance Wu Tang-chieh (吳當傑) said the TAIEX’s sharp decline yesterday may only be a short-term phenomenon caused by the weak performance of major global stock markets during the Lunar New Year holiday.
Under the normal market mechanism, there is no rationale for the government to authorize the state-run National Stabilization Fund (國家金融安定基金) to enter the stock market, Wu, who is also the executive secretary of the fund’s management committee, said by telephone.
Several Asian major securities markets, including Japan and Singapore, gradually recovered yesterday, and the public has no need to panic, Wu said, adding that the committee will carefully watch the future movements of Taiwan’s securities market and act accordingly.
Selling in the local bourse came largely from foreign institutional investors, who were net sellers of NT$44.4 billion in shares yesterday, Huang said.
TSMC, the world’s largest contract chipmaker, fell 4.29 percent to NT$100.50. Huang said that if TSMC fails to stay above the NT$100 level over the next few sessions, the broader market could encounter further volatility.
Among the “Apple concept stocks,” Hon Hai Precision Industry Co (鴻海精密), which assembles iPhones and iPads for Apple, shed 4.24 percent to NT$81.3, and smartphone camera lens supplier Largan Precision Co (大立光) closed down 1.72 percent at NT$1,145.
Last week, Apple reported that its iPhone sales for the fourth quarter of last year totaled 51 million units, lower than a market estimate of 54.7 million units.
The disappointing sales data have depressed Apple shares in the past few sessions.
“After today’s sell-off, the local bourse has become technically weaker. Even if the market stages a rebound, any immediate breakthrough is unlikely,” Huang said.
However, Huang said he still expected the index to see some support to stay within the 8,100 to 8,150 points range.
Additional reporting by Amy Su