Local shares on Friday took a beating, plunging nearly 2 percent after a surprise announcement by US President Donald Trump overnight that the US would impose 10 percent tariffs on an additional US$300 billion of Chinese goods, dealers said.
The new tariffs would cover smartphones, including iPhones, which are made in China, leading to particularly heavy pressure on listed Taiwanese tech vendors in Apple Inc’s supply chain, dealers added.
Old economy and financial stocks also came under downward pressure in line with the broader market amid escalating trade frictions between Washington and Beijing, sending the market even lower, dealers said.
The TAIEX on Friday ended down 182.71 points, or 1.7 percent, at 10,549.04, after moving between 10,524.68 and 10,641.28, on turnover of NT$158.05 billion (US$5.04 billion). That was a plunge of 3.1 percent from a close of 10,891.98 on July 26.
The market opened down 0.84 percent in reaction to a 1 percent decline in the Dow Jones Industrial Average overnight. Trump’s announcement of new tariffs turned a 311-point gain in early trading on the Dow into a 280-point fall by the end of the session.
In Taiwan, Apple suppliers such as contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and smartphone lens maker Largan Precision Co (大立光) were hit hard, pushing the weighted index below 10,600 points for the first time since June 18, when it closed at 10,566.74.
Trump said in a series of tweets that the punitive tariffs are scheduled to take effect on Sept. 1.
The announcement came after the US and China resumed trade talks in Shanghai earlier this week, but did not make any significant progress.
“The US president’s threat is aimed at forcing China to cut a deal by Sept. 1 or the new tariffs will come into being,” Hua Nan Securities Co (華南永昌證券) analyst Kevin Su (蘇俊宏) said.
“But few in the market expect a deal to be reached by then, so investors around the world simply dumped stocks to avoid further losses down the road,” Su said, referring not only to Wall Street, but also to other regional markets.
“Look at the expanded turnover. I think many investors just panicked,” Su said.
Local investors rushed to cut their holdings in leading Apple concept stocks, because the new tariffs on US$300 billion of goods imported from China would cover smartphones and PCs, Su said.
Among the Apple suppliers that lost ground, TSMC, the most heavily weighted stock on the local market, fell 1.95 percent to close at NT$251.50, with 53.95 million shares changing hands.
TSMC’s fall alone cost the TAIEX about 50 points and contributed to a 2.07 percent fall in the bellwether electronics sector.
Largan tumbled 7.93 percent to close at NT$3,890, while Hon Hai Precision Industry Co (鴻海精密), the largest iPhone assembler, lost 3.08 percent to end at NT$75.50 and Pegatron Corp (和碩), a smaller iPhone assembler, fell 2.17 percent to close at NT$49.70.
“Judging from the movement of these tech heavyweights, I suspect that foreign institutional investors were sellers,” Su said.
Foreign institutional investors on Friday sold a net NT$19.65 billion of shares, Taiwan Stock Exchange data showed.
Selling spread to the old economy sector as market sentiment was hurt by the escalating trade skirmish, Su said.
Among them, Formosa Chemicals & Fibre Corp (台灣化纖) shed 2.02 percent to close at NT$92, Formosa Plastics Corp (台灣塑膠) lost 2.01 percent to end at NT$97.50 and textile maker Far Eastern New Century Corp (遠東新世紀) fell 1.2 percent to close at NT$428.90.
In the financial sector, which ended down 1.26 percent, Fubon Financial Holding Co (富邦金控) fell 1.28 percent to close at NT$42.45 and E.Sun Financial Holding Co (玉山金控) fell 1.37 percent to end at NT$25.25.
After Friday’s sell-off, the TAIEX has become technically fragile, Su said.
“The downbeat mood over future trade talks between Washington and Beijing means that losses on Taiwan’s market could continue,” Su said. “I wouldn’t rule out the possibility of the TAIEX testing 10,227 points, the intraday low on May 29, in the near term.”
Elsewhere in Asia on Friday, markets fell sharply as Trump’s decision ratcheted up investor fears over the trade war between the world’s top two economies.
The losses in Asia followed a broad-based sell-off on Wall Street.
The decision came just as US markets were rallying on the back of the US Federal Reserve’s decision on Wednesday to cut interest rates for the first time in more than a decade.
“The 10 percent is ... for a short-term period and then I can always do much more or I can do less, depending on what happens with respect to a deal,” Trump said at the White House, adding: “It could be lifted up to well beyond 25 percent.”
The announcement means virtually all of the US$660 million in annual trade of goods between the world’s two biggest economies would have tariffs on them after Sept. 1.
China on Friday warned that it would take “countermeasures” if the US followed through on its threat, with the Chinese Ministry of Commerce calling the decision a “serious violation” of a June truce struck by Trump and Chinese President Xi Jinping (習近平).
Negotiators are expected to reconvene in Washington early next month for another round of talks.
On Thursday, Trump told reporters that he was “not concerned ... at all” by the negative reaction among investors, saying that he had anticipated it.
“Trump sent the market in a tailspin,” Oanda Corp senior market analyst Alfonso Esparza said. “So far, the US consumer has been spared from the tariffs on Chinese goods, but as Trump’s threats grow in scope, so does the potential impact [as] higher costs will have to be passed down from American companies.”
Hong Kong’s Hang Seng on Friday lost the most among regional indices, shedding 647.12 points, or 2.4 percent, to 26,918.58, plunging 5.2 percent from a close of 28,397.74 on July 26.
Tokyo’s Nikkei 225 on Friday fell 473.22 points, or 2.2 percent, to 21,067.77, a drop of 2.7 percent from 21,658.15 a week earlier.
The Shanghai Composite on Friday lost 40.93 points, or 1.4 percent, to 2,867.84, a 2.6 percent decrease from 2,944.54 on July 26.
Seoul’s KOSPI on Friday dropped 19.21 points, or 1 percent, to 1,998.13, plunging 3.3 percent from 2,066.26 a week earlier.
“Selling will likely lead trade,” Okasan Online Securities Co Ltd said in a note.
“There are fresh signs that US-China trade frictions are worsening again,” while investors are likely to stay away from buying ahead of the weekend, it added.
Tit-for-tat moves by Japan and South Korea to rescind each other’s favored export partner status added to the trade jitters, as the US allies spar over a long-running dispute over forced labor during World War II.
A string of South Korean court rulings ordering Japanese companies to compensate forced labor victims has infuriated Japan, which has argued that the issue was resolved when the two countries normalized ties.
The latest measures came after Tokyo last month tightened the rules on exports of three products key to South Korea’s chip and smartphone industries, raising fears for global supply in the sectors.
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