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September 20, 2017

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TAIEX drops 2.34% on unstable global equity

TAIPEI--Volatility in global equity markets sent shares in Taiwan sharply lower Wednesday after foreign institutional investors aggressively sold their holdings throughout the session, dealers said.

Selling was seen across the board and hit the electronics sector particularly hard.

In the electronics sector, Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電), the most heavily weighted stock in the local market, took a beating, while stocks in Apple Inc.'s supply chain faced heavy downward pressure as the U.S. consumer electronics giant reported lower-than-expected iPhone sales, they said.

Stocks in the old economy and financial sectors also felt the pinch of steep falls in global markets as investors locked in the gains posted in recent sessions ahead of the Lunar New Year holiday, they added.

The weighted index on the Taiwan Stock Exchange closed down 198.09 points, or 2.34 percent, at 8,264.48, after moving between 8,230.46 and 8,313.83, on turnover of NT$134.08 billion (US$4.43 billion).

The market opened down 2.03 percent as investors reacted to heavy losses recorded on Wall Street and other regional markets during the Lunar New Year holiday, when the local bourse was closed, dealers said.

Downward pressure then accelerated to further drag down the index on investor fears that further volatility in global markets would continue to hurt the local market, they said.

Fragile Confidence in Market Prospects

"The sell-off showed fragile confidence in market prospects at home and abroad," Mega International Investment Services Corp. analyst Alex Huang said.

Huang said the latest sharp decline on Wall Street largely resulted from the Fed's Jan. 29 announcement to further reduce its monthly bond buying program by US$10 billion a month and also from disappointing manufacturing activity data in the U.S.

The U.S. Institute for Supply Management reported earlier this week that the purchasing managers' index for January fell to an eight-month low.

"Many investors have doubts about the global economic recovery; the latest U.S. economic data still bothered the market. The first idea on their minds was to cut their holdings to pocket gains posted previously," the analyst said.

Foreign Institutional Investors Sell NT$44.4 Billion

Huang said selling in the local bourse largely came from foreign institutional investors, who were net sellers of NT$44.4 billion in shares on Wednesday.

"Judging from the magnitude of the declines of large-cap stocks, such as TSMC, I think foreign investors rushed to dump these stocks soon after the market opened," Huang said.

TSMC, the world's largest contract chip-maker, fell 4.29 percent to close at NT$100.50, with 145.52 million shares changing hands.

Huang said that if TSMC fails to close above the NT$100 level over the next few sessions, the broader market could encounter further volatility.

Among the "Apple concept stocks," Hon Hai Precision Industry Co. which assembles iPhones and iPads for Apple, shed 4.24 percent to end at NT$81.30, and smartphone camera lens supplier Largan Precision Co. closed down 1.72 percent at NT$1,145.00.

Apple-concept Shares Depressed

Last week, Apple reported that its iPhone sales for the fourth quarter of last year totaled 51 million units, lower than a market estimate of 54.70 million units. The disappointing sales data has depressed Apple shares in the past few sessions.

In the old economy sector, Nan Ya Plastics Corp. fell 4.69 percent to close at NT$63.00, and Formosa Plastics Corp. lost 3.46 percent to end at NT$75.30.

"After today's sell-off, the local bourse has become technically weaker. Even if the market stages a rebound, any immediate breakthrough is unlikely," Huang said.

But Huang said he still expected the index to see some support at the 8,100-8,150 point level.

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