Fears of U.S. Rate Hike Shake Taiwan Stocks, AI Sector Takes a Hit


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.

See also  Investing in India's booming AI sector: Top AI stocks to consider

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.

See also  Apple supplier Foxconn's India chip venture failure highlights challenges for new players

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.

Frequently Asked Questions (FAQs) Related to the Above News

What caused the decline in Taiwan stocks?

The decline in Taiwan stocks was primarily caused by fears of a potential U.S. interest rate hike, which shook the market. The release of minutes from a July meeting of the U.S. Federal Reserve indicating upside risks to inflation further fueled these concerns.

Which sectors in Taiwan were particularly impacted by the market decline?

The artificial intelligence (AI) sector in Taiwan was particularly impacted by the market decline. Stocks related to AI development experienced weakness during this period.

What contributed to the decline in AI-related stocks?

The decline in AI-related stocks was driven by investors' concerns about a potential U.S. interest rate hike and the resulting impact on inflation. Additionally, the tech-heavy Nasdaq index's performance, which is closely watched by investors, also influenced the AI sector.

Which specific AI-related stocks faced significant sell-offs?

Stocks such as Wistron Corp., Quanta Computer Inc., and Wiwynn Corp., which are involved in AI development, faced significant sell-offs as investors opted to lock in profits following recent gains.

What were the challenges faced by the semiconductor industry in Taiwan?

The semiconductor industry in Taiwan faced challenges due to weak demand for consumer electronic devices and ongoing inventory adjustments. This, along with the concerns about a U.S. interest rate hike, led to declines in stocks of companies such as Taiwan Semiconductor Manufacturing Co. (TSMC), Global Unichip Corp., and ASE Technology Holding Co.

How did the financial sector perform during this period?

The financial sector in Taiwan staged a modest technical rebound during this period. Concerns surrounding China's debt situation drove investors to seek refuge in financial stocks. However, market sentiment remained fragile due to the escalating debt issue, including the bankruptcy protection filing by Evergrande Group.

What impact did the volatility in U.S. markets have on Taiwan's old economy stocks?

The volatility in U.S. markets had a negative impact on Taiwan's old economy stocks. Cement companies such as Taiwan Cement Corp. and Asia Cement Corp. saw declines, as did the paper industry.

Which sector outperformed the broader market during this period?

The transportation sector in Taiwan outperformed the broader market during this period. Rising freight rates contributed to the surge in stock prices of bulk cargo shippers like Sincere Navigation Corp. and U-Ming Marine Transport Corp., as well as container cargo shippers like Evergreen Marine Corp. and Yang Ming Marine Transport Corp.

What was the net action of foreign institutional investors in the Taiwan stock market?

Foreign institutional investors sold a net worth of NT$19.60 billion worth of shares on the main board of the Taiwan Stock Exchange.

What factors are expected to continue influencing the Taiwan stock market in the near future?

The Taiwan stock market is likely to continue being influenced by global economic factors, including the potential U.S. interest rate hike, and ongoing uncertainties such as China's debt situation. These factors will shape market sentiment and investor behavior in the near future.

Please note that the FAQs provided on this page are based on the news article published. While we strive to provide accurate and up-to-date information, it is always recommended to consult relevant authorities or professionals before making any decisions or taking action based on the FAQs or the news article.

Share post:



More like this

New Machine Learning Algorithm Enables Reliable Predictions in Complex Systems, Aiding Aircraft Performance and Virus Spread, Canada

New algorithm allows reliable predictions in complex systems, aiding aircraft performance and virus spread. Groundbreaking AI breakthrough by University of Toronto researchers.

Ali Abdelaziz Expresses Concern for MMA Fighters and Proposes Exciting BMF Title Fight

Ali Abdelaziz sparks confusion with cryptic tweet about MMA fighters' welfare. Proposes exciting BMF title fight between Gaethje and Holloway. Fans eagerly await further updates.

Japanese Tech Giant Rakuten to Launch Own AI Language Model to Keep Pace with Industry Leaders

Japanese tech giant Rakuten to launch its own AI language model within two months, aiming to keep pace with industry leaders and capitalize on its unique data.

The Water Footprint of AI: A Threat to Sustainability for Tech Giants, US

The Water Footprint of AI: Threat to Sustainability for Tech Giants - Study reveals significant water usage by AI technologies, raising concerns over environmental impact. Investment opportunity in water sector emerges with proposed $1 billion ETF.