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May 27, 2017

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TAIEX dives on US Fed concerns, China data

TAIPEI -- Shares in Taiwan took a beating to close below 8,300 points Thursday amid fears that the U.S. Federal Reserve will make an early exit from its current quantitative easing after sending mixed messages on the issue, dealers said.

Selling, in particular, accelerated after HSBC Holdings and Markit Economics reported a worse-than-expected Chinese Purchasing Manager's Index (PMI) for May, which made concerns over the regional economy run deeper, the dealers said.

Large-cap stocks such as Taiwan Semiconductor Manufacturing Co. (TSMC), the most weighted stock in the local bourse, faced heavy profit-taking pressure after making a strong showing in recent sessions, they added.

The weighted index closed down 161.01 points, or 1.91 percent, at 8,237.83, after moving between 8,235.50 and 8,373.09 on turnover of NT$104.57 billion (US$3.49 billion).

The market opened down 0.37 percent as investors took cues from a retreat on Wall Street overnight in reflection of the concerns over a possible end by the U.S. Fed of its liquidity-easing measures, the dealers said.

In the mid-morning session, downward pressure increased in the wake of the lower-than-expected manufacturing activity in China reported by HSBC and Markit Economics, with investors scrambling to dump their large-cap holdings, send the index into a tailspin, they said.

"Investors had been waiting for fresh leads, no matter whether positive or negative, to move the broader market out of the recent doldrums," Concord Securities analyst Kerry Huang said.

U.S. Fed Chairman Ben Bernanke told lawmakers overnight in a congressional testimony that withdrawing monetary stimulus too early could harm the country's economic recovery.

However, the minutes of the Fed's latest policymaking meeting showed that some members of the monetary policy committee were willing to scale down the central bank's bond-buying program as soon as June if the economic recovery is sustainable.

The mixed signals from the Fed dragged down Wall Street and also impacted several regional markets such as Taipei, Tokyo and Hong Kong, Huang said.

"Even worse, China's manufacturing activity appeared slower. Investors here, in particular institutional ones, simply seized the news to capitalize on the gains they had built up recently," Huang said.

China's May PMI fell to 49.6 in an initial reading from the final reading of 50.4 for April. The May figure was lower than a previous market estimate of 50.4.

The electronics sector closed down 1.96 percent, while the financial sector ended down 2.26 percent.

Among the losing electronics heavyweights, TSMC, the world's largest contract chip maker, fell 3.57 percent to NT$108.00, while smartphone camera lens supplier Largan Precision Co. shed 3.43 percent to end at NT$930.00.

In the financial sector, Cathay Financial Holding Co. shed 3.24 percent to close at NT$40.35 and Fubon Financial Holding Co. lost 2.81 percent to end at NT$39.75.

Although selling focused on large-cap stocks, select small and mid-cap ones appeared resilient, the dealers said.

Hannstar Display Corp. rose 7 percent, the daily maximum increase, to close at NT$14.10 after the company's book value per share at the end of the first quarter rose to NT$10.13 from NT$9.43 recorded at the end of the previous quarter.

"Despite the downtrend, the market still saw some technical support at around the 20-day moving average of 8,220 points," Huang said. "I expect the market will consolidate over the next few sessions to further digest downward pressure," she added.

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