Despite a rebound led by electronics stocks on Friday, Taiwanese shares are expected to face selling pressure this week following a 4.46 percent drop in the Philadelphia Semiconductor Index and a 4.05 percent retreat in Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) American depositary receipts on the US markets on Friday, equity strategists said.
The TAIEX has been under heavy downside pressure and would likely retest 13,000 points today, they said, citing influence from high inflation in the US, falling assets in the UK, Washington’s latest curbs on chip exports to China and Russia’s invasion of Ukraine.
The TAIEX soared 317.39 points, or 2.48 percent, to close at 13,128.12 on Friday, as TSMC rose 4.3 percent and contributed more than 140 points to the broader market’s rise.
Photo: CNA
However, the benchmark index posted a weekly decline of 4.19 percent, from 13,702.28 on Oct. 7, Taiwan Stock Exchange data showed.
Foreign institutional investors sold a net NT$50.19 billion (US$1.57 billion) of local shares and domestic proprietary traders sold a net NT$4.24 billion on Friday, while investment trust companies bought a net NT$4.27 billion, exchange data showed.
Investors are especially scrutinizing tech stocks, as a weakness in demand has prolonged inventory adjustments, with PCs and consumer electronics posting their first quarterly adjustment in the third quarter, Allianz Global Investors Taiwan Ltd (安聯投信) said.
“The inventory adjustments are expected to end in the first half of next year and the trough for tech shares should occur before the end of the year,” an Allianz Taiwan equity research team said in a note on Friday.
“The fourth quarter should be a good time to collect tech stocks for long-term investment purpose and focus should be on targets with clear growth momentum, such as increased market share, higher product penetration and improved specifications, which would help buffer the risk of short-term inventory adjustments,” it said.
Investors this week are expected to pay attention to high-tech heavyweights, such as TSMC and Largan Precision Co (大立光), as well as earnings reports from export-oriented tech stocks, such as electronic components supplier Lite-On Technology Corp (光寶科技) and NAND flash memory controller supplier Phison Electronics Corp (群聯電子), for the latest quarter in light of growing downside risks, it added.
Other tech heavyweights — such as AUO Corp (友達), United Microelectronics Corp (聯電), Powertech Technology Inc (力成科技), MediaTek Inc (聯發科) and Realtek Semiconductor Corp (瑞昱半導體) — are also slated to release their earnings results next week to shed light on their business outlook for this quarter and next quarter, as well as the situation of inventory digestion in the supply chain.
Meanwhile, the US earnings season will feature big reports across sectors this week, with Bank of America, Johnson & Johnson, Netflix Inc, IBM Corp, Tesla Inc and Procter & Gamble Co all due to take the stage. And the market will also pay attention to any stimulus measures unveiled by Beijing after the Chinese Communist Party's 20th National Congress.
Yuanta Securities Investment Consulting Co (元大投顧) said that it expects policy-driven catalysts, such as biotech, power and energy-related themes, to emerge before the Nov. 26 local elections.
“The government plans to invest NT$11 billion in the next four years to build a contract development and manufacturing organization company for nucleic acid drugs,” Yuanta said in a recent note.
“Clean energy has also been a focus of government policy,” it said. “Coupled with power supply shortages in recent years, clean energy sector development has now become a top priority for the government, with Taiwan Power Co (台電) recently announcing it would invest NT$564.5 billion in the next 10 years to build a more resilient power grid,” it added.
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