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Local market hit by dispute over China trade pact

TAIPEI--Shares in Taiwan closed lower Wednesday as selling focused on the financial sector after hundreds of protesters skeptical of a trade-in-services pact with China occupied the Legislative chamber, forcing the Legislature to shut down, dealers said.

Buying also spread to the bellwether electronics sector and old-economy stocks as investors locked in gains they had built up in recent sessions to further drag down the index, the dealers said.

Market sentiment turned cautious before the U.S. Federal Reserve wrapped up a policymaking meeting later in the day, with many investors watching closely how the Fed will continue to wind down its quantitative easing measures, they added.

The weighted index on the Taiwan Stock Exchange closed down 42.48 points, or 0.48 percent, at 8,689.46, after moving between 8,682.75 and 8,749.80 on turnover of NT$98.65 billion (US$3.26 billion).

The market opened up 0.15 percent and rose to the day's high in a knee-jerk reaction to a rise on Wall Street overnight boosted by eased political tension in Ukraine, the dealers said.

But as the index moved closer to the nearest technical resistance level at around 8,800 points, profit taking set in as concerns over the fate of the cross-strait service trade agreement weighed on investor sentiment to push the index down into the red at the close, they said.

“Judging from the losses suffered by financial stocks, the standoff at the Legislative Yuan did impact the broader market,” Mega International Investment Services Corp. analyst Alex Huang said.

Investors Take Chances Adjusting Holdings in Shares

In the financial sector, which closed down 0.75 percent, Yuanta Financial Holding Co. (元大金控) fell 1.60 percent to end at NT$15.40, Cathay Financial Holding Co. (國泰金控) lost 1.13 percent to close at NT$43.85 and Fubon Financial Holding Co. (富邦金控) ended down 1.08 percent at NT$41.35.

"Some investors seized the dispute over the trade agreement as an excuse to unload their holdings in electronics stocks like MediaTek Inc. (聯發科)," Huang said. MediaTek, one of Taiwan's leading integrated circuit designers, fell 2.87 percent to close at NT$440.00 as investors expressed concerns over the company's consolidated sales for the second quarter.

Personal computer vendor Acer Inc. (宏碁電腦) lost 1.92 percent to end at NT$17.85 after prosecutors raided the company's headquarters and 13 other locations as part of a probe into an insider trading allegation.

However, smartphone camera lens supplier Largan Precision Co. (大立光電) outperformed the broader market, closing up 2.91 percent at NT$1,415 after the company proposed a NT$28.5 cash dividend for 2013.

In the old economy sector, Formosa Plastics Corp. (台塑集團) shed 0.95 percent to close at NT$73.30, and Asia Cement Corp. (亞洲水泥) lost 1.18 percent to end at NT$37.55.

“Investors need to pay close attention to the two-day Fed policymaking meeting to find out about the conclusion as to what the next move of the central bank will be in scaling back its fund injections,” Huang said.

The Fed has started to cut back its monthly bond-buying program from January to the current level of US$65 billion, and the market expects the bank to announce an additional cut of US$10 billion in the latest meeting.

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