Taiwan shares end flat after recovering from early losses

2017/08/11 17:35:54 fontsize-small fontsize-default fontsize-big
CNA file photo

CNA file photo

Taipei, Aug. 11 (CNA) Shares in Taiwan closed flat Friday after recovering from losses early in the session, while market sentiment remained cautious amid rising geopolitical tensions between the United States and North Korea, dealers said.

Bargain hunting for select high tech stocks, including smartphone camera lens supplier Largan Precision Co. (大立光) and iPhone assembler Hon Hai Precision Industry Co. (鴻海), and some financial stocks helped the broader market climb out of an early slump, dealers said.

Buying was sparked by a decision by global index provider MSCI Inc. to raise Taiwan's weighting in two of its indexes for the first time in four years following a quarterly index review, dealers said.

The weighted index on the Taiwan Stock Exchange closed down 0.17 points at 10,329.57, after moving between 10,238.50 and 10,338.06. Turnover totaled NT$113.646 billion (US$3.74 billion) during the session.

The market opened down 0.61 percent and moved to the day's low in a knee-jerk reaction to a drop on Wall Street, where the Dow Jones Industrial Average ended down 0.93 percent and the tech-heavy NASDAQ index shed 2.13 percent overnight. The U.S. market was reacting to U.S. President Donald Trump's tough rhetoric against North Korea, which has threatened to launch missiles on the U.S. Pacific territory of Guam, dealers said.

However, after the weighted index fell below 10,300 points, bargain hunting emerged, with traders picking up certain heavyweights in both the electronics and financial sectors, helping the broader market recoup most of its early losses by the end of the session, dealers said.

"It was no surprise that the local main board initially reacted badly to the weakness of the U.S. market and dropped below 10,300 points early in the session," KGI Securities analyst Phil Chu said.

"But because the local equity market fell sharply yesterday, underperforming world markets, the pressure caused by Washington-Pyongyang tensions was absorbed to some extent, paving the way for bargain hunting later in today's session," Chu said. On Thursday, the weighted index dropped about 140 points, or 1.34 percent.

Chu said investors were also encouraged to buy into select large-cap stocks on Friday after an upgrade of Taiwan's weighting in the MSCI Emerging Markets Index from 12.07 percent to 12.09 percent and on the MSCI All-Country Asia ex-Japan Index from 14.00 percent to 14.01 percent.

Thanks to the bargain hunting, certain high-tech and financial heavyweights closed higher, lending support to the weighted index, he said.

Among the gaining large-cap stocks in the bellwether electronics sector, Hon Hai, the second largest stock in terms of market capitalization, rose 0.43 percent to close NT$116.50, off an early low of NT$114.50.

Flat panel maker AU Optronics Corp. (友達) added 2.56 percent to end at NT$12.00 after hitting a low of NT$11.70.

Both Largan and flat screen supplier Innolux Corp. (群創) moved above their previous closing level throughout the session Friday. Largan gained 3.44 percent to close at NT$5,565.00 and Innolux rose 4.04 percent to end at NT$14.15.

Underperforming the broader market, contract chip maker Taiwan Semiconductor Manufacturing Co. (台積電), the most heavily weighted stock on the local market, fell 0.70 percent to close at NT$212.50, recovering from an early low of NT$210.50.

The company reported a day earlier that its consolidated sales for July had dropped by a monthly 14.9 percent.

In the financial sector, Yuanta Financial Holding Co. (元大金) gained NT$0.39 percent Friday to close at NT$12.95, while Cathay Financial Holding Co. (國泰金) ended unchanged at NT$48.15, recovering from a low of NT$47.60.

"While the local main board remained resilient today, it is possible that the volatility will continue as tensions between the U.S. and North Korea persist," Chu said.

He said close watch should be kept on how foreign institutional investors are trading since they have raised the number of short position contracts in options, which indicates that they are anticipating further weakness in the spot market.

(By Frances Huang)

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