The TAIEX took a beating yesterday, closing down 380 points and erasing all of Tuesday’s gains, as investors locked in the previous session’s profits from the bellwether electronics sector, dealers said.
Market sentiment remained cautious due to a rate hike cycle launched by the US Federal Reserve to fight inflation, so selling spread to old economy stocks, in particular the transportation sector, where several major shipping stocks are traded, pushing the main board even lower, dealers said.
Global stock markets and oil prices also hit the skids yesterday as worries about rising interest rates and recessions persisted.
The enthusiasm that saw Wall Street post its best day in more than a month on Tuesday suddenly evaporated as Europe opened 1.5 percent lower and Brent crude prices plunged 4 percent following what had also been a downbeat Asian session.
In Taipei yesterday, the TAIEX closed down 380.89 points, or 2.42 percent, at 15,347.75. Turnover totaled NT$278.532 billion (US$9.35 billion), with foreign institutional investors selling a net NT$22.44 billion of shares on the main board, Taiwan Stock Exchange data showed.
The sell-off wiped out the main board’s Tuesday gain of 361.06 points, or 2.35 percent.
Japan’s benchmark Nikkei 225 yesterday shed 0.4 percent to close at 26,149.55. Australia’s S&P/ASX 200 lost 0.2 percent to 6,508.50, South Korea’s KOSPI fell 2.7 percent to 2,342.81, Hong Kong’s Hang Seng dropped 2.6 percent to 21,008.34, while the Shanghai Composite index sank 1.2 percent to 3,267.20.
“Despite a rally on Tuesday, the [TAIEX] remained technically unstable after a recent slump, as market sentiment remained haunted by concerns over a rate hike by the Fed, which is expected to continue to drain funds out of the region for US dollar-denominated assets,” MasterLink Securities Corp (元富證券) analyst Tom Tang (湯忠謙) said. “There are growing concerns that an aggressive rate hike cycle will hurt the economy.”
Before Tuesday’s rebound, the TAIEX had tumbled about 1,300 points, or 7.82 percent, over the past eight trading sessions, meaning the main board was technically fragile, dealers said.
“In addition, investors witnessed Dow futures dipping again now, pointing to an ugly opening of the spot market later today, so they simply shifted to the sell side to take their money and run, avoiding possible losses tomorrow,” Tang said.
Fed Chairman Jerome Powell was yesterday due to start testifying at the US Congress. Investors would be looking for further clues about whether another 75 basis-point rate hike is on the cards for next month.
Economists polled by Reuters expect the Fed to deliver a 75-basis-point interest rate hike next month, followed by a 0.5 percentage-point rise in September.
They said the Fed is unlikely to scale back to 0.25 percentage-point rate hikes until November at the earliest.
Most other global central banks face a similar situation, apart from the Bank of Japan, which last week pledged to maintain its policy of ultra-low interest rates.
Minutes from the Bank of Japan’s April policy meeting released yesterday showed the central bank’s concerns about the impact the plummeting currency could have on the country’s business environment.
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