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June 28, 2017

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TSMC sets new high for market cap

TAIPEI, Taiwan -- The market capitalization of contract chip maker Taiwan Semiconductor Manufacturing Co. (TSMC) hit a new high Tuesday after its stock gained ground on a technical rebound by high-tech stocks in U.S. markets overnight, dealers said.

TSMC, which is supplying the A11 processor for the next generation of iPhones, led the bellwether electronics sector higher amid optimism that it will benefit from Apple's expected launch of its new phones in September, dealers said.

The buying also showed that investors were keen to hold onto the stock before it goes ex-dividend (after dividends have been distributed) on June 26, they said.

TSMC shares rose 1.64 percent to close at NT$216.50 (US$7.12) with 28.6 million shares changing hands on the Taiwan Stock Exchange, where the weighted index ended up 0.72 percent at 10,324.46.

The stock, the most heavily weighted on Taiwan's market, got a boost soon after the market opened because of the tech-heavy Nasdaq's 1.4 percent gains overnight, and the momentum continued to the end of the session.

The market cap of TSMC reached NT$5.65 trillion, the highest ever for any stock listed in Taiwan, when the stock hit its high for the day of NT$218.00.

"Taiwan's high tech stocks are highly correlated with their counterparts in the U.S. market so it was no surprise that a strong rebound on the Nasdaq led TSMC and other local electronics stocks to move higher today," KGI Securities analyst Phil Chu said.

Chu said TSMC had lagged behind some other electronics stocks in recent sessions because of volatility among U.S. tech stocks. "Today's buying was simply a matter of playing catch-up," he said.

According to Chu, foreign institutional investors sold a net 36 million TSMC shares from June 13 to 19, and he suggested that Tuesday's buying may have been from foreign institutional investors wanting to build back their holdings of the stock.

"Many investors remain upbeat about TSMC's outlook and have faith it will make a comeback in the third quarter after being slowed during the traditionally weak second quarter," Chu said, with Apple's new iPhones expected to bolster TSMC's results.

Analysts expect that the launch of the new iPhones along with peak season effects in the third quarter will boost shipments of chips made on TSMC's advanced 10 nanometer process from July to September, further strengthening its product mix.

TSMC Chairman Morris Chang (張忠謀) said at an annual general meeting held on June 12 that TSMC will have another good year in 2017 after its net profit hit a new high of NT$334.25 billion in 2016, up 9 percent from a year earlier.

Chang said TSMC's sales will grow 5-10 percent a year by 2020 and outperform the global semiconductor industry.

"More importantly, TSMC will issue a cash dividend of NT$7 per share for its 2016 earnings, the highest in the company's history, and the high dividend has encouraged investors to buy into and hold onto the stock," Chu said.

Chu said such buying is expected to continue before TSMC goes ex-dividend on June 26.

TSMC is expected to issue a total of NT$167.5 billion in cash dividends, and foreign institutional investors, which hold a roughly 80 percent stake in the company, will receive most of that.

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