Taiwanese stocks experienced a downturn as fears of a potential interest rate hike by the U.S. Federal Reserve shook the market. Concerns were fueled by the release of minutes from a July policymaking meeting, where Fed officials discussed the possibility of more rate hikes due to increased risks of inflation. The country’s bellwether electronics sector, particularly AI-related stocks, took the brunt of the weakness, while the financial sector showed some resilience. The Taiex, the weighted index on the Taiwan Stock Exchange, closed 0.82 percent lower at 16,381.31 points.
The day started with a modest decline and continued to move within a narrow range until selling pressure intensified in the afternoon session. This pushed the Taiex closer to its nearest technical support level at around 16,000 points, the 120-day moving average. Analysts attributed the market’s decline to growing concerns about rising yields and a hawkish stance on inflation from the U.S. central bank, which negatively impacted tech stocks.
The sell-off in the technology sector was particularly noticeable, with the Nasdaq index experiencing a 1.17 percent drop and the local electronics sector falling 1.27 percent. The semiconductor sub-index also declined by 0.90 percent. Stocks related to AI development, specifically those in the computer and peripherals segment, took a significant hit, dropping by 3.66 percent. Investors took the Fed’s concerns about inflation as an opportunity to secure profits, causing AI-related stocks to bear the brunt of the sell-off.
Some notable AI-related stocks that experienced losses included Wistron Corp., which shed 6.59 percent, and Quanta Computer Inc., which lost 6.06 percent. Wistron’s data center solution subsidiary, Wiwynn Corp., also dropped 3.24 percent. Inventec Corp., an AI server maker, saw a decline of 4.20 percent, while Giga-Byte Technology Co., a leading vendor of graphics cards for AI applications, fell by 3.08 percent.
The semiconductor industry also faced challenges due to inventory adjustments and weak demand for consumer electronic devices. This impacted Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock on the local market, which experienced a 0.92 percent loss. TSMC’s application-specific integrated circuit design subsidiary, Global Unichip Corp., fell by 1.47 percent. Other notable companies in the sector, including IC packaging and testing services provider ASE Technology Holding Co. and smartphone IC designer MediaTek Inc., also saw declines.
While concerns about a potential rate hike weighed on the market, the financial sector managed a slight rebound. The sector rose by 0.27 percent after reaching a high of 1,618.86. However, Cathay Financial Holding Co. and Fubon Financial Holding Co. ended the day with slight losses. The market also remained cautious due to ongoing concerns about the debt situation in China, following the bankruptcy filing of Evergrande Group, a highly indebted property developer.
Old economy stocks in Taiwan were also affected by the volatility in the U.S. markets. Companies such as Taiwan Cement Corp. and Asia Cement Corp. experienced declines, dragging down the cement industry. The paper industry also faced challenges, with Shihlin Paper Corp. experiencing a 3.35 percent drop and Chung Hwa Pulp Corp. falling by 2.26 percent.
On a positive note, the transportation sector outperformed the broader market, rising by 1.76 percent. This was attributed to rising freight rates, which benefited bulk cargo shippers due to a bottleneck in the Suez Canal caused by drought.
Foreign institutional investors were net sellers on the main board, selling shares worth NT$19.60 billion ($612.94 million) on Friday.
Overall, the downturn in Taiwanese stocks was primarily driven by fears of an interest rate hike in the U.S., which had a negative impact on the electronics sector, particularly AI-related stocks. However, the financial sector showed some resilience, and the transportation sector experienced gains. The market remains cautious due to ongoing concerns over the debt situation in China.