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May 29, 2017

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Taiwan shares down on interest rate concerns

TAIPEI, Taiwan -- Shares in Taiwan closed lower Friday amid renewed concerns over a possible interest rate hike cycle kicked off by the U.S. Federal Reserve, dealers said.

The weighted index on the Taiwan Stock Exchange ended down 14.11 points, or 0.15 percent, at 9,306.83, after moving between 9,303.57 and 9,330.95, on turnover of NT$93.59 billion (US$3.23 billion).

Select electronics heavyweights, such as Taiwan Semiconductor Manufacturing Co. (TSMC,台積電) and Hon Hai Precision Industry Co. (鴻海精密), appeared resilient, however, lending some support to the broader market, the Central News Agency reported.

The market opened down 4.05 points and moved within a narrow trading range the rest of the session after James Bullard, the president of the St. Louis Fed, said overnight that the U.S. central bank could raise interest rates in the first quarter of 2015, dealers said.

"Bullard is perceived as a dovish member of the Fed. So his rate hike comments did surprise the market, and many investors preferred to take cautious positions for the moment," Ta Ching Securities analyst Andy Hsu told CNA.

Market Could Suffer Major Pullback

"Such caution was evident, in particular after the local index breached 9,300 points, because investors were afraid that the equity market could suffer a major technical pullback at any time in the near future," Hsu said.

The construction sub-index fell 0.65 percent after the central bank announced new measures to cap the loan-to-value (LTV) ratio — the percentage of a home's value that a bank is allowed to loan to a property buyer.

"A lower LTV ratio means depleting liquidity, and that could hurt buying interest in the home market," Hsu said. "I expect more tightening measures to follow."

"The silver lining was that the market remained full of liquidity as foreign investors kept moving money into Taiwan. They were still willing to pick up high-tech stocks with healthier fundamentals," Hsu said.

TSMC, the most heavily weighted stock in the local market, rose 0.80 percent to close at NT$125.50 amid expectations that demand for mobile devices will remain strong, CNA said.

Hon Hai, which assembles iPhones and iPads for Apple Inc., ended up 0.10 percent at NT$98.60 on hopes that Apple's new devices will boost the Taiwanese firm's shipments.

"I expect the local market to continue to move in a narrow range next week. If any selling emerges, the index could receive short-term support at around 9,200 points," Hsu said.

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