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June 28, 2017

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Shares end lower ahead of MSCI Inc. adjustments

TAIPEI -- Shares in Taiwan ended lower Friday before semi-annual index adjustments by MSCI Inc. were to take effect after the market's close, dealers said.

In the index adjustments announced earlier this month, Taiwan's weighting was cut slightly in the MSCI Emerging Markets Index and the MSCI All Country Asia ex-Japan Index.

Selling focused on select large cap stocks, such as chip maker Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電), electronics contractor Hon Hai Precision Industry Co. (鴻海精密) and integrated circuit designer MediaTek Inc. (聯發科) as investors rushed to pocket gains they had built up in the stocks, they said.

The weighted index on the Taiwan Stock Exchange closed down 33.09 points, or 0.36 percent, at the day's low of 9,075.91, off an early high of 9,139.57, on turnover of NT$135.25 billion (US$4.51 billion).

The market opened up 0.24 percent and moved to the day's high on a mild technical rebound from the losses seen a day earlier, but after the index briefly breached 9,100 points, downward pressure set in to drag the broader market into negative territory, dealers said.

Reactions to MSCI Index Cut

"It was no surprise that investors adjusted their portfolios and lowered their holdings in the local bourse after its weighting in the MSCI Index was cut," Asia Securities Investment Consultant analyst Chang Chih-cheng said.

The willingness of investors to increase their holdings was also affected by worries about possible negative leads from abroad during the upcoming Dragon Boat Festival holiday, Chang said. The local market will be closed Monday during the holiday.

Large-cap Shares Down

Chang said large-cap stocks were highlighted in Friday's selloff, with TSMC down 2.05 percent to close at NT$119.50, Hon Hai down 1.18 percent to end at NT$92.40, and MediaTek down 2.21 percent to close at NT$487.00.

There was a silver lining to the selling, however, according to the analyst. After investors dumped large cap stocks, they bought into some market laggards, such as touch panel maker TPK Holding Co. (宸鴻), to lend some support to the broader market.

TPK rose 2.53 percent to close at NT$243.00 on hopes that the company has secured orders from Apple Inc. to supply touch panels for iWatch production, which could strengthen the touch screen firm's earnings in the second half of this year.

The financial sector also outperformed the broader market to close up 0.33 percent on bargain hunting, dealers said.

Financial sector

E. Sun Financial Holding Co. (玉山金控) gained 2.06 percent to close at NT$19.80, and Mega Financial Holding Co. (兆豐金空) rose 1.62 percent to end at NT$25.05.

"The local bourse could consolidate in the short term but it will have technical support at around the 9,000-point mark," Chang said. "I still have faith that the longer term uptrend remains intact as the economy at home and abroad is recovering."

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