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June 26, 2017

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Local market hit hard by stock losses in semiconductor sector

TAIPEI--Shares in Taiwan took a beating Thursday as large-cap semiconductor stocks came under heavy downward pressure amid cautious sentiment toward the outlook for the third quarter, dealers said.

The weighted index on the Taiwan Stock Exchange closed down 131.17 points, or 1.38 percent, at 9,315.85, after moving between 9,313.87 and 9,438.97 on turnover of NT$105.49 billion (US$3.52 billion).

Consolidated Mode Is On

"Following today's plunge, the local market has become technically weaker. It could fall into consolidation mode over the next few sessions, with the nearest technical support at around 9,200 points," Mega International Investment Services Corp. analyst Alex Huang said.

The market opened down 0.12 percent on mixed performance on Wall Street overnight, and selling escalated as investors rushed to dump UMC and Siliconware shares in the wake of their cautious third-quarter forecasts, the dealers said.

Contract chip maker United Microelectronics Corp. (UMC,聯華電子) and integrated circuit (IC) packaging and testing services provider Siliconware Precision Industries Co. (SPIL,矽品精密) were highlighted in the sell-off after the two companies' third-quarter guidances disappointed the market, the dealers said.

Led by UMC and Siliconware, other high-tech heavyweights such as the world's largest semiconductor foundry operator Taiwan Semiconductor Manufacturing Co. (TSMC,台灣積體電路) and integrated circuit designer MediaTek Inc. (聯發科技) also suffered dives, they said.

"Judging from today's sell-off in the large-cap IC stocks, I suspect that the selling came largely from foreign institutional investors who had built up significant gains in the sector and then took the money and ran," Alex Huang said.

"They seized the negative leads from UMC and Siliconware as a reason to cut their holdings in the local electronics sector and reap the profits," Huang said.


on Q3 Guidance

UMC fell 5.70 percent to close at NT$14.05 after the chip maker forecast a day earlier that its wafer shipments for the third quarter will rise 1-3 percent from a quarter earlier, lower than an earlier market expectations of a 5-10 percent sequential increase.

Siliconware shed 6.05 percent to end at NT$41.90 after the company said its third-quarter sales could stay little changed or even fall 4 percent from a quarter earlier.

"I think the forecasts by UMC and Siliconware were only two isolated cases, rather than a problem for the entire semiconductor sector. But investors simply dumped almost all of these large-chip stocks for profit today," Huang said.

TSMC, the most heavily weighted stock in the local market, fell 2.81 percent to close at NT$121.00 and MediaTek lost 6.57 percent to end at NT$469.00, ahead of an investor conference scheduled to open after the market closed.

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