TSMC shares rise, banks falter

Taiwan's key stock index rose, led by Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), after the chipmaker said it will be profitable in the third quarter as the average selling price of its wafers increases.

Lenders such as First Commercial Bank (第一銀行) fell, leaving the broader market mixed, after the government said the industry's non-performing loans rose to a record high in the second quarter.

The TWSE Index rose 12.37, or 0.3 percent, to 4562.73. Five stocks rose for every four that fell. The total value of trade today was NT$39.84 billion (US$1.15 billion), compared to NT$44.74 billion yesterday.

While further interest rate cuts are likely, earnings may not recover because of depressed global economic activity, said Han Ong, head of Asia-Pacific strategy at Salomon Smith Barney Hong Kong Ltd.

On Friday, the government said it expects the economy to shrink 0.4 percent this year from last year. The central bank cut its key rediscount rate, charged to commercial lenders for 10-day loans, to 3.25 percent from 3.5 percent.

``I continue to suggest to clients to take a very cautious stance,'' Ong said.

TSMC rose 50 cents, or 0.8 percent, to NT$66.50. The biggest made-to-order chipmaker's current capacity is at about 40 percent and will rise throughout the rest of the year, Deputy Chief Executive Tseng Fan-cheng (曾繁城) said in an interview. Closures of chip plants by Fujitsu Ltd and Motorola Inc are a ``good sign'' because the chipmakers will need to farm out more of their production when the global economy rebounds, Tseng said.

Banks fell after the Bureau of Monetary Affairs said 6.6 percent of the outstanding credits of domestic banks and investment trust companies were non-performing at the end of June.

That's up from 6 percent at the end of the first quarter. The figures didn't include foreign banks.

First Commercial Bank, the biggest listed lender in terms of assets, fell 10 cents, or 0.6 percent, to NT$16.50. Hua Nan Commercial Bank (華南銀行), Taiwan's second-biggest listed lender, fell 30 cents, or 1.8 percent, to NT$16.30. Chinatrust Commercial Bank (中國信託銀行), the sixteenth biggest listed lender in terms of assets, fell 40 cents, or 1.8 percent, to NT$21.60.

Transport shares fell 1 percent, bringing their two-day decline to 4.3 percent. The TWSE Transport Index gained 21 percent last week on hopes official direct transport links would soon eventuate between Taiwan and China after Taiwan President Chen Shui-bian (陳水扁) said he was in favor of closer economic ties with the mainland.

Eva Airways Corp (長榮航空) fell 55 cents, or 4.1 percent, to NT$13. Evergreen Marine Corp (長榮海運), the island's biggest shipping company, fell 20 cents, or 1.2 percent, to NT$17. Wan Hai Lines Ltd (萬海航運), the second-biggest shipping company by market value, fell 10 cents, or 0.7 percent, to NT$15.30.

China Airlines Co (華航) rose 10 cents, or 0.6 percent, to NT$16.70. Boeing Co, the largest commercial aircraft maker, offered to buy all of China Airlines' Airbus A340-300 jets to help win an order for its competing 777 aircraft.

Hon Hai Precision Industry Ltd (鴻海精密) rose NT$2, or 1.2 percent, to NT$165. Taiwan's biggest maker of computer parts and World Wiser Electronics Inc (欣興電子) plan to set up a venture to make circuit boards for mobile phones. China, which has 120.6 million cell phone users, overtook the US as the biggest cell phone market last month.