The TAIEX yesterday closed down by more than 160 points, as investors took cues from losses incurred by other regional markets, including Hong Kong, where the trading of China’s debt-ridden property developer Evergrande Group (恆大集團) was suspended, dealers said.
Old economy stocks, especially in the shipping industry, came under heavy pressure, which pushed the broader market into negative territory, while select large tech stocks posted gains or recouped some of their losses to support the main board at the end of the session, they said.
The heavy losses affecting large-cap shipping stocks pushed down the transportation sector by 7.37 percent, causing the broader market to trend lower, they added.
The TAIEX closed down 162.54 points, or 0.98 percent, at 16,408.35. Turnover totaled NT$299.54 billion (US$10.75 billion), with foreign institutional investors selling a net NT$3.11 billion of shares.
“Amid volatility in regional markets, market sentiment here got hit as margin calls on shipping stocks after their recent tumbles prompted many retail investors to scramble to dump these stocks,” Concord Securities Co (康和證券) analyst Kerry Huang (黃志祺) said.
A margin call occurs when the value of an investor’s margin account falls below the broker’s required amount, which requires the investor to either deposit more money or sell some of the assets in the account.
“Despite a 160-point drop in the TAIEX, turnover remained thin today, indicating that there might be more selling to come in these shipping stocks, which could pave the way for further losses down the road,” Huang said.
Among the cargo container shipping stocks faced with margin calls, shares of Evergreen Marine Corp (長榮海運), Yang Ming Marine Transport Corp (陽明海運) and Wan Hai Lines Ltd (萬海航運) plunged 10 percent, the maximum daily decline, to close at NT$102.5, NT$97.2 and NT$165.5 respectively.
“While the bellwether electronics sector as a whole finished below the previous closing level, select large-cap stocks, especially in the semiconductor industry, appeared resilient compared with the broader market,” Huang said.
Contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) fell 0.35 percent to close at NT$572 after reaching a low of NT$569. Led by TSMC, the electronics sector declined 0.8 percent to end at 772.52.
“I suspect some government-led funds stood on the buy side for TSMC to keep the broader market from falling further by taking advantage of the stock’s huge weighting,” Huang said.
“We have to watch closely whether the TAIEX will maintain its strength above the next technical support at 16,248 points, the intraday low on Aug. 20. Otherwise, further losses could push down the main board to test 16,000 points,” he said.
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