Local shares on Friday closed slightly lower after the market reacted to the US’ increase of punitive tariffs on US$200 billion of imported Chinese goods that took effect at noon in Taipei, dealers said.
The bellwether electronics sector led the downturn, but some investors parked their funds in select old economy and financial stocks to lend some support to the broader market, they said.
The TAIEX on Friday ended down 20.68 points, or 0.19 percent, at 10,712.99, after moving between 10,669.39 and 10,834.69. Turnover was NT$124.49 billion (US$4.02 billion).
That was a drop of 3.5 percent from a close of 11,096.30 on May 3.
The market opened up 0.17 percent and rose to the day’s high at about 10am on a technical rebound from a session earlier, when the weighted index ended down 1.74 percent because of ongoing trade friction between the US and China, dealers said.
However, with the TAIEX surpassing 10,800 points and the increase in punitive tariffs on imported Chinese goods from 10 percent to 25 percent taking effect, selling set in to pull the market into negative territory before some late buying limited the losses, they said.
“The earlier gains were simply technical in nature from the plunge a session earlier,” Hua Nan Securities Co (華南永昌證券) analyst Kevin Su (蘇俊宏) said.
“Concerns over the global trade issue still dictated market sentiment, in particular the implementation of the 25 percent tariffs,” he said.
The US announced that it would carry out the tariff increase against China, effective from 12:01am on Friday, after the first day of the latest round of trade talks in Washington on Thursday did not yield satisfactory results.
“We have to pay close attention to how the ongoing trade talks will proceed after the negotiations resume Friday,” Su said.
“The market is also worried about potential new 25 percent tariffs on an additional US$325 billion of Chinese goods as US President Donald Trump threatened on Sunday [last week],” he said.
The electronics sector continued to dominate the movement of the broader market throughout the session on Friday, Su said.
The subindex for the sector closed down 0.37 percent at 439.41, off a high of 445.33.
Among the falling large-cap tech stocks, contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the most heavily weighted stock on the local market, fell 0.19 percent to close at NT$256, with 18.6 million shares changing hands, after hitting a high of NT$259.
Hon Hai Precision Industry Co (鴻海精密), an assembler of Apple Inc’s iPhones that is second to TSMC in terms of market cap, lost 0.71 percent to end at NT$83.70, off a high of NT$85.60, while Largan Precision Co (大立光), a supplier of smartphone camera lenses to Apple, rose 1.02 percent to close at NT$4,455 amid optimism over its sales this month.
Among the gaining old economy stocks, food conglomerate Uni-President Enterprises Corp (統一企業) rose 1.05 percent to close at NT$77.30, Formosa Chemicals & Fibre Corp (台灣化纖) added 0.94 percent to end at NT$107 and Formosa Plastics Corp (台灣塑膠) gained 0.92 percent to close at NT$109.50.
In the financial sector, which closed up 0.05 percent, CTBC Bank (中信銀行) rose 1.68 percent to end at NT$21.20 and Shanghai Commercial & Savings Bank (上海商業儲蓄銀行) added 0.80 percent to close at NT$50.70, while Cathay Financial Holding Co (國泰金控) fell 0.69 percent to end at NT$43.20.
Foreign institutional investors on Friday sold a net NT$3.78 billion in shares, Taiwan Stock Exchange data showed.
“While foreign institutional investors dumped their holdings today, I’m guessing government-led funds stood on the buy side to prevent the TAIEX from falling further at a time of rising trade tensions,” Su said.
“The market is still facing stiff technical resistance ahead of 10,800 points for the moment,” he added.
Elsewhere on Friday, Shanghai led gains across most Asian markets at the end of a torrid week for equities, with investors keeping a eye on the China-US trade talks after Washington hiked tariffs.
Equities in Asia started well as dealers took heart from positive comments from Trump on the prospects for a deal, but the region turned negative as the threatened levies kicked in and China vowed to hit back, saying that it “deeply” regretted the US move.
However, Shanghai and Hong Kong bounced back on hopes that the economic superpowers would be able to reach a deal to avert a trade war that most observers warn could shatter global growth and batter markets.
The tariffs came into effect after the first day of high-stakes negotiations in Washington between Chinese Vice Premier Liu He (劉鶴), US Trade Representative Robert Lighthizer and US Secretary of the Treasury Steven Mnuchin.
After a week in which trading floors have been a sea of red, regional equities were given a lift by Trump saying that he had received a “beautiful letter” from Chinese President Xi Jinping (習近平) and that it was “possible” to get a deal.
The Shanghai Composite, which from Monday to Thursday lost more than 7 percent, on Friday ended up 88.26 points, or 3.1 percent, at 2,939.21, but plunged 4.5 percent from a close of 3,078.34 on April 30, the last day of trading before a long weekend for International Workers’ Day.
Meanwhile, Hong Kong’s Hang Seng on Friday piled on 239.17 points, or 0.8 percent, to close at 28,550.24, but dropped 3.9 percent from 29,699.11 on April 30.
Seoul’s KOSPI on Friday edged up 6.03 points, or 0.3 percent, to 2,108.04, plummeting 4 percent from a close of 2,196.32 on May 3, as investors brushed off news that North Korea had tested a long-range weapon, which is likely to raise tensions after a breakdown of denuclearization talks with the US.
Sydney and Singapore each added 0.3 percent.
However, Tokyo’s Nikkei 225 on Friday slid 57.21 points, or 0.3 percent, to 21,344.92, a drop of 4.1 percent from a close of 22,258.73 on April 26, the last day of trading before a long national holiday to celebrate the ascension of Japanese Emperor Naruhito to the Chrysanthemum Throne.
Wellington, Manila and Mumbai also fell.
“Given the deadline has now passed, there is the possibility that tariffs could still be avoided given that US officials allowed for goods currently in transit to be exempt from the new tariff increases,” CMC Markets UK chief market analyst Michael Hewson said. “Which means there is a potential window, albeit a limited one, for an agreement to be hammered out.”
“Markets will be in a holding pattern as we await the outcome of the meeting,” Australia and New Zealand Banking Group Ltd head of Asia research Khoon Goh said. “If there is a breakdown and the tariffs go up, then we will see a risk-off tone in markets.”
That tariffs were to rise midway through the talks gave “precious little time to come up with something that satisfies both sides,” Oanda Corp senior market analyst Jeffrey Halley said.
Although markets were up, “the peace is fragile, and it won’t take much today to panic investors into heading for the exit door en masse,” he added.
Halley also warned that while Trump praised Xi’s letter, it was hard “to see how either of these two presidents will ever manage to really share the toys and play nicely on the global stage.”
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