The TAIEX on Friday rallied after a government fund intervened in the market, but it was not enough to prevent a more than 8 percent decline in the main board’s market capitalization this week amid mounting fears over the COVID-19 pandemic.
The index has lost 894.78 points, or 8.83 percent, since Monday due to global volatility caused by a spike in new cases worldwide.
Its market cap fell NT$2.71 trillion (US$89.43 billion), or 8.8 percent, over the week to about NT$30.80 trillion, Taiwan Stock Exchange (TWSE) data showed.
Photo: EPA-EFE / David Chang
The index on Friday fell 5.38 percent before bouncing back 552.75 points, or 6.37 percent, to close at 9,234.09. It was still down 8.8 percent from last week’s close.
The rally came after the National Financial Stabilization Fund committee on Thursday authorized the fund to intervene in the market to smooth out volatility and shore up investor confidence.
Contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the most heavily weighted stock on the local market, on Friday gained 8.87 percent to close at NT$270 and iPhone assembler Hon Hai Precision Industry Co (鴻海精密), second to TSMC in terms of market cap, rose 6.79 percent to close at NT$70.80.
Largan Precision Co (大立光), a supplier of smartphone camera lenses to Apple Inc, rose by the 10 percent daily limit to NT$3,575. Largan is the most expensive stock on the local market.
However, for the week, TSMC still fell 6.9 percent, Hon Hai lost 5.09 percent and Largan dropped 11.95 percent.
Foreign institutional investors sold a net NT$128.24 billion of shares over the week, dumping large-cap stocks to meet redemption needs in their home markets, the TWSE said.
Wide swings on the main board largely reflected concerns over the pandemic’s effects on the economy, the exchange said.
Combined sales at the nation’s listed companies last month fell 7.76 percent annually as production at their facilities in China was interrupted by lockdowns aimed at containing the outbreak, it said.
However, many of the firms have sound fundamentals, with strong bottom lines and ample liquidity, the exchange said, adding that they have been gradually resuming production at their Chinese plants.
The local equity market has been offering attractive cash dividend yields, compared with neighboring markets, the TWSE said, citing data showing that the average cash dividend yield in Taiwan over the past few years ranged from 3.08 percent to 4.52 percent, much higher than time-deposit rates offered by banks.
Since 2016, listed companies on the main board have issued more than NT$1.1 trillion in cash dividends each year, which has made the main board an ideal investment tool, it said.
However, despite the exchange’s optimism, an Asian brokerage has cut its target for the TAIEX this year by 7.6 percent, from 12,830 points to 11,860 points, and maintained an “underweight” rating for the main board.
It said in a research note that global demand for tech gadgets is expected to fall, which would hurt the export-oriented electronics sector’s profitability at a time of weakening global economy.
The brokerage has also cut its target for Chinese equities by 7 percent, the smallest cut among the regional markets.
It maintained an “overweight” rating on the Chinese market, as it has relatively low valuation, the brokerage said.
Elsewhere in Asia on Friday, South Korean shares bounced 7.4 percent, although that still left them down more than 11 percent for the week.
Australia’s S&P/ASX 100 on Friday eked out a 0.6 percent gain, but was still down 13 percent for the week.
Japan’s TOPIX rose 1 percent on Friday, up 1.7 percent for the week.
Hong Kong’s Hang Seng Index on Friday soared 5 percent, but it was down by the same percentage for the week.
The Shanghai Composite Index rose 1.6 for the day, paring its weekly loss to 4.9 percent.
India’s SENSEX on Friday rose 5.8 percent, but was still down 12.3 percent for the week.
The Kuala Lumpur Composite Index on Friday rose 6.9 percent, paring its weekly loss to 3 percent.
Additional reporting by Reuters
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