Taiwan Stocks Experience Decline Ahead of Fed Meeting – Caution Remains
Shares in Taiwan continued to fall below 16,600 points on Wednesday, as caution prevailed in the market ahead of the conclusion of the U.S. Federal Reserve’s two-day meeting, according to analysts. The electronics sector, in particular, led the broader market downward, with foreign institutional investors selling on the settlement date for September futures contracts. This selling pressure caused tech heavyweight stocks in the semiconductor sector to suffer losses.
The Taiex, the weighted index on the Taiwan Stock Exchange, closed down 0.61 percent at 16,534.75. The total turnover for the day reached NT277.77 billion (US$8.68 billion). Analyst Adam Lin from Moore Securities Investment Consulting Co. highlighted that investors were anxious about the outcome of the Fed meeting, as it could provide insights into the path of inflation and the economy. Despite the market’s expectation that interest rates will remain unchanged this time, the Fed’s comments could shed light on the future rate hike cycle.
Lin noted that the local main board faced continued pressure following a decline of 0.37 percent the previous day. Foreign institutional investors were eager to sell their stocks in the spot market to generate profits in futures, given their higher short position futures contracts than long position contracts. Consequently, semiconductor stocks, such as Taiwan Semiconductor Manufacturing Co. (TSMC) and MediaTek Inc., suffered losses.
On Wednesday, foreign institutional investors sold a net NT$18.19 billion worth of shares on the main board. TSMC, the most heavily weighted stock in the local market, dropped 0.56 percent, while MediaTek Inc. shed 1.81 percent. Moreover, highly priced integrated circuit (IC) stocks experienced a sell-off, with Global Unichip Corp. and Alchip Technologies Ltd. falling by 4.56 percent and 5.95 percent, respectively.
Other prominent stocks in the electronics sector, including Hon Hai Precision Industry Co. and Largan Precision Co., also experienced losses. Notably, stocks related to artificial intelligence (AI) development had earlier gains erased due to a failed technology rebound. Lin attributed the fall in AI-related stocks to rotational buying. Companies such as Quanta Computer Inc., Wistron Corp., Giga-Byte Technology Co., and Compal Electronics Inc. all saw their stocks decline.
However, the transportation industry, which includes major shipping companies in Taiwan, performed well despite the downturn in the broader market. This was partly due to Maersk, the world’s largest container cargo shipper, projecting a rebound in global trade by 2024. Consequently, shares in Evergreen Marine Corp., Wan Hai Lines Ltd., and Yang Ming Marine Transport Corp. all experienced gains.
In addition, select military concept stocks, such as ship builder CSBC Corp., outperformed the Taiex due to rotational buying. Meanwhile, Taiwan Cement Corp. and Asia Cement Corp. in the old economy sector suffered losses in line with the overall market decline. The financial sector also experienced a decrease, with Cathay Financial Holding Co. and Fubon Financial Holding Co. among the notable losers.
Although the Taiex managed to stay above the 120-day moving average of 16,495 points, signaling resilience, Lin warned that a further decline could test the next technical support level at around 16,000 points. It is clear that caution continues to dominate the Taiwan stock market amid anticipation of the Fed’s decision and its impact on the global economy.
