Local market eases worries over US debt ceiling
CNATAIPEI--Shares in Taiwan on Wednesday gave back some of the gains made a day earlier as market sentiment turned cautious over concerns that the United States Congress might not reach an agreement to raise America's debt ceiling, dealers said.
October 17, 2013, 12:03 am TWN
Local manufacturers in the Apple Inc. supply chain, in particular smartphone camera lens supplier Largan Precision Co., faced heavy downward pressure amid concerns that demand for high-tech devices will slack off in the fourth quarter, they said.
Although Cathay Financial Holding Co. bucked the slide in the broader market with its major shareholder increasing his holdings in the company, the financial sector as a whole trended down on profit taking, they said.
The weighted index closed down 35.70 points, or 0.42 percent, at 8,332.18, after moving between 8,332.18 and 8,384.03, on turnover of NT$72.97 billion (US$2.48 billion).
The market opened 0.19 percent higher at the day's high on follow-through buying from a day earlier, but selling immediately followed, with large-cap electronics stocks targeted, dealers said.
Downward pressure also spread to the old economy and financial sectors, which kept the index in negative territory during most of the trading session, they said.
“Investors remained anxious about the U.S.'s debt ceiling problems amid fears of a possible default on its debt obligations,” Mega International Investment Services Corp. Alex Huang said.
“While it is very unlikely that Washington will let a debt default happen, worries over the possibility still affected investor sentiment and the movements of global financial markets,” Huang said, referring to the Dow Jones Industrial Average's nearly 1-percent loss overnight.
'Apple Concepts' Lead Electronics Sector to Drop
The Taiwan stock exchange's bellwether electronics sector closed down 0.62 percent on Wednesday, led by many “Apple concept stocks,” Huang said.
Largan Precision fell 3.32 percent to close at NT$960.00, and Hon Hai Precision Industry Co., which assembles iPhones and iPads for Apple, lost 0.41 percent to end at NT$73.50.
“These Apple concept stocks made significant gains in recent sessions after Apple unveiled its two iPhones on Sept. 10. Uncertainty over global financial markets prompted investors to pocket those gains,” Huang said.
Taiwan Semiconductor Manufacturing Co., the most heavily weighted stock in the local market, dropped 0.93 percent to close at NT$106.00, and smartphone vendor HTC Corp. fell 1.57 percent to end at NT$125.50.
“Wise investors should keep their hands off electronics stocks for now as fears have escalated that the high-tech sector will not benefit from the peak season effects that used to be seen in the fourth quarter, due to weakening global demand,” Huang said.
In the financial sector, which closed down 0.30 percent, Cathay Financial outperformed the broader market, ending 0.33 percent higher at NT$46.15 on news that Chairman Tsai Hong-tu and his family spent NT$3.1 billion for an additional 0.6 percent stake in the company in September.
In the old economy sector, Nan Ya Plastics Corp. fell 0.31 percent to close at NT$65.20, while Formosa Plastics Corp. gained 0.13 percent to end at NT$77.80.
“Compared with the high-tech sector, industrial stocks appeared to be resilient. It seemed that investors were more willing to hold old economy stocks as they saw those stocks as a safe haven for their funds,” Huang said.
He said that while the local market could continue to fall on unfavorable external factors, a high level of liquidity is expected to help the index remain above 8,250 points in the short term.