Failed rallies by Taiwan technology and financial shares led to late selling that sent the broader index to a lower close yesterday and wiped out early Wall Street-inspired gains. The TAIEX closed at 7,557.01, down 128.47 points or 1.67 percent from Monday's close at 7,685.48.
Electronics, Taiwan's most heavily weighted sector, briefly rose more than 1 percent, taking strong momentum from overnight gains on Wall Street's closely watched NASDAQ index. But in the end, the sector failed to sustain the gains.
Similarly, Taiwan's financials, second only to technologies in the TAIEX rankings, rose despite a fresh Standard and Poor's caution that earthquake-related mortgage defaults could push non-performing loans past the 6 percent mark. But the momentum soon was lost and the sector closed 2.24 percent lower.
Notably, Standard and Poor's said the quake's near-term impact on local economic growth should be limited and that medium-term growth could actually be stimulated by accelerated outlays for infrastructure and reconstruction in earthquake's wake.
Brokers said the abortive rebounds by the market's two leading sectors triggered caution.
"People are very disappointed that the two sectors failed to sustain their gains," said Hotung Securities research vice president Albert Lin. "We had expected the two sectors to lead the index past resistance at 7,800 points."
Lin said lingering worries about a further rise in banks' overdue loans despite concerted state efforts to help write them down would dog the sector.
Financials had fallen sharply since the Sept. 21 quake and took a further hit after the finance ministry said banks would have to shoulder quake-related mortgage defaults.
Chang Hwa Bank (
United Microelectronics (聯華電子), Taiwan's second-largest semiconductor maker, fell NT$1 to NT$74 despite announcing that global demand for its foundry chips would outstrip its capacity into the first quarter of 2000 amid heavy capital spending.
United Micro said it would spend US$2.1 billion to build new capacity in 2000, slightly below the US$2.2 billion pace of 1999 but far above the US$1.4 billion of 1998. Capital spending would rise to US$3 billion in 2001, a United Micro executive said.
In a separate development, top microchip maker Taiwan Semiconductor Manufacturing Co said yesterday revenue loss from the 921 earthquake would be less than NT$2.8 billion. The company's September-December revenue was expected to drop by NT$2.8 billion because of the earthquake, which halted the island's semiconductor industry with sweeping power outages.
Brokers said yesterday's trade proved that resistance at 7,800 points was heavy, and the index likely would need more time to consolidate support around 7,400-7,500.
For today, a 7,450-7,650 range was seen.
Foreign fund buying boosted early sentiment, brokers said.
Overseas institutional investors continued to show confidence on Monday with active net buying of NT$2.08 billion, following huge net buying of NT$15.6 billion last week even as local investors sold stock in the wake of the earthquake.
The index took early momentum from Monday's gains on Wall Street, particularly a 2.16 percent rebound by the technologies-heavy NASDAQ index, a closely watched barometer for Taiwan's technology shares, as well as a 1.25 percent Dow Jones index rise. Brokers said Wall Street's gains showed US investors were less concerned about the prospects for fresh interest rate hikes.
Taiwan building material shares, which had surged recently on expectations that post-quake reconstruction would bring increased demand, encountered corrections.
Cements slumped 3.15 percent, while steels fell 1.88 percent.
China Steel (
Brokers said the market did not react much to news yesterday that the quake's impact on local prices was significantly smaller than expected.
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