When Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) Chairman Morris Chang (張忠謀) speaks, people listen. And when he toned down his previous optimism over the sector's recovery, the stock market trembled yesterday.
The TAIEX yesterday fell 189.73, or 3.76 percent, to 4855.34, the lowest closing since Dec. 4, after TSMC on Thursday reported less-than-expected second quarter profit and said it will cut capital expenditures for this year to US$2 billion from US$2.5 billion.
Yesterday's trading volume was NT$52.47 billion (US$2.32 billion) compared with NT$78.01 billion Thursday. On the main board, 617 stocks closed the session lower, outnumbering 58 gainers, while 38 stocks closed unchanged.
Despite the sharp drop in the stock market, officials at the Ministry of Finance said it was a natural reaction to the outlook given by the world's largest contract chipmaker and said the government does not need to intervene.
"There is no need for the National Stabilization Fund (國安基金) to enter the market," said Minister of Finance Lee Yung-san (李庸三). The government has used the fund to support shares when the market has been impacted by non-economic factors.
TSMC, which accounted for more than a fifth of the TAIEX's decline, plunged by the daily 7 percent limit to NT$54, its lowest since Oct. 23, following a 18.5 percent drop in its American Depositary Receipts overnight.
"As a leading indicator of the outlook for a lot of electronics companies, the third quarter for the technology industry looks pretty grim," said Bentham Hung, who manages NT$3.5 billion in stocks at Fu-hwa Securities Investment Trust Co (復華投信).
"That'll put a lot of downward pressure on the market."
TSMC rival United Microelectronics Corp (UMC, 聯電), scheduled to present its second-quarter results and third-quarter guidance Tuesday, fell by almost the 7 percent daily limit, ending 6.9 percent lower at NT$33.5.
Analysts said the selling spree would likely continue early next week unless UMC released encouraging business results to offset the damage caused by TSMC.
First Commercial Bank rose NT40.40, or 1.9 percent, to NT$21. Taiwan's largest publicly traded lender plans to auction NT$56.8 billion of bad loans on Tuesday, the local Chinese-language media reported. The sale will cut the lender's non- performing loan ratio to about 3 percent, from 6.9 percent at the end of last month, the paper said.
Microelectronics Technology Inc fell NT$1.50, or 6.8 percent, to NT$20.60. The telecommunications equipment maker expects first-half pretax profit of about NT$188 million, down almost two-thirds from a year earlier, media reports said.
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