Local market weakens on Wall Street's drop
CNA January 15, 2014, 12:05 am TWN
TAIPEI--Shares in Taiwan closed lower Tuesday as market sentiment was dampened by a dive on Wall Street overnight amid renewed fears that the U.S. Federal Reserve will speed up the pace of tapering its monthly bond buying program, dealers said.
While the old economy and financial sectors suffered heavy downward pressure, select large-cap high-tech stocks appeared resilient, lending support to the broader market and preventing the index from falling further, dealers said.
The weighted index on the Taiwan Stock Exchange ended down 18.06 points, or 0.21 percent, at 8,548.14 points, after moving between 8,523.46 and 8,568.31 on turnover of NT$82.96 billion (US$2.77 billion).
The market opened down 0.24 percent and fell to the day's low in a knee-jerk reaction to the Wall Street losses, but as the index moved closer to the nearest technical support at around 8,500 points, bargain hunting emerged, capping the losses by the end of the session, dealers said.
Despite the overnight drop, "the U.S. market remains high so investors are likely to cut their holdings on any negative leads," MasterLink Securities analyst Tom Tang said, alluding to Atlanta Fed President Dennis Lockhart's statement that he supports further scaling back of the bond-buying program this year.
In its last policymaking meeting in December, the Fed decided to cut back its quantitative easing by US$10 billion a month to US$75 billion. The U.S. central bank is scheduled to hold another meeting at the end of this month.
Investors Prefer to Stay on the Sidelines in the Short Run
"Today's relatively small turnover in the local market showed that many investors preferred to stay on the sidelines as they fear Wall Street may suffer further losses, which could send ripples through the regional markets," Tang said.
Stocks in the old economy and financial sectors suffered steeper losses as investors pocketed the gains posted in recent sessions, seizing the weaker U.S. market as a reason to sell, dealers said.
Among the falling traditional industrial stocks, Nan Ya Plastics Corp. (南亞塑膠) dropped 1.93 percent to NT$66.10, Formosa Petrochemical Corp. (台塑) lost 1.32 percent to end at NT$82.00, and Eclat Textile Co. (儒鴻企業) shed 6.21 percent to close at NT$310.00.
China Steel Corp. (中國鋼鐵) bucked the downtrend, finishing 1.52 percent higher at NT$26.65 on hopes that it will raise its domestic wholesales steel prices for March contracts.
In the financial sector, Cathay Financial Holding Co. (國泰金控) dropped 1.69 percent to close at NT$46.60 and Yunata Financial Holding Co. (元大金控) ended down 1.15 percent at NT$17.15.
"The silver lining today was that the bellwether electronics sector remained stable on the back of the gains posted by several large-cap stocks. Otherwise, the index would have fallen further," Tang said.
Among the electronics heavyweights, Taiwan Semiconductor Manufacturing Co. (台積電), the most heavily weighted stock in the local market, gained 0.49 percent to close at NT$103.50, while Hon Hai Precision Industry Co. (鴻海精密), which assembles iPad and iPhone for Apple Inc., ended up 0.61 percent at NT$82.30.
"The local market may remain in consolidation mode for the next few sessions, fluctuating between 8,500 and 8,600 points, amid fears over further volatility on Wall Street," Tang said.
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