Taiwan shares plunge by over 1.8% after BOJ’s surprise tightening

Taipei, Dec. 20 (CNA) Shares in Taiwan fell sharply by more than 1.8 percent on Tuesday as investors were rocked by heavy losses on the Tokyo market in the wake of an unexpected decision by the Bank of Japan (BOJ). , the Japanese central bank, to tighten its monetary policy, traders said.

A sell-off was seen across the board on the local main board, led by large-cap stocks in both the electronics and non-tech sectors, pushing the weighted index below the nearest technical support of the 120-day moving average of 14,311 points and close even lower, traders added.

The Taiwan Stock Exchange (TWSE) weighted index Taiex was down 263.29 points or 1.82 percent at 14,170.03 after moving between 14,157.99 and 14,451.91. Turnover was NT$263.67 billion (US$8.56 billion).

BOJ decision

The market opened up 0.16 percent and continued to move in a narrow range before the BOJ concluded a policy-making meeting, announcing that it would widen its yield curve control (YCC) tolerance range by the upper limit of the tolerance band on the 10- year to raise government bond yields to 0.5 percent from 0.25 percent, traders said.

With the Tokyo market down more than 700 points at one point, investors in Taiwan rushed to cut their holdings after 11 a.m., and the sell-off continued into the end of the session with the Taiex reaching tumbled to its lowest level since Nov. 11, when the main board closed at 14,007.56, traders added.

“The BOJ’s reversal of its long-term loose monetary policy was completely unexpected. A surprise like this was the last thing the market wanted to see,” Mega International Investment Services Corp. analyst Alex Huang said. said. After the decision was announced, the Japanese yen rose to a four-month high against the US dollar at one point.

“A stronger yen means investors will have to adjust their investment portfolios by sending funds to yen-denominated assets, which is expected to create volatility in global financial markets, which is likely to remain in the market for some time,” Huang said. .

In Taiwan, Huang said, the local stock market followed a big swing in Tokyo and other regional markets including Hong Kong and Shanghai. “Large-cap stocks across the board led the decline after 11 a.m. and none of the major sectors escaped the selloff with the bellwether electronics sector in focus,” Huang said.

Technical stocks

The electronics sector lost 2.13 percent with the semiconductor sub-index down 2.15 percent after contract chipmaker Taiwan Semiconductor Manufacturing Co. TSMC’s drop added nearly 90 points to the Taiex’s drop on Tuesday.

Among other semiconductor stocks, United Microelectronics Corp., a smaller contract chipmaker, fell 2.56 percent to end at NT$41.85; IC packaging and test services provider ASE Technology Holding Co. fell 2.40 percent to close at NT$93.50; and smartphone IC designer MediaTek Inc. fell 1.52 percent to end at NT$646.00.

In addition, application-specific integrated circuit (ASIC) designer Alchip Technologies Ltd. down 7.01 percent to close at NT$823.00, and power management IC designer Silergy Corp . fell 3.82 percent to NT$453.50.

Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. down 1.48 percent to close at NT$100.00, and flat panel makers AU Optronics Corp . and Innolux Corp. fell 1.00 percent and 2.68 percent to NT$14.80 and NT$10.90, respectively.

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Shares in other sectors

The textile sector lost 2.03 percent with Eclat Textile Co. which fell 4.49 percent to close at NT$446.50, and rival Makalot Industrial Co. which fell 3.95 percent to end at NT$231.00.

The petrochemical sector also fell 1.54 percent after Formosa Chemicals & Fiber Corp. closed 1.70 percent lower at NT$69.20, and Formosa Plastics Corp. ended up 1.16 percent at NT$85.30.

Reversing a 1.50 percent gain from a session earlier, the biotech industry fell 4.26 percent with drug brand Chunghwa Chemical Synthesis & Biotech Co down 7.46 percent to end at NT$28.55 to close, and the test kit supplier Panion & BF Biotech Inc. fell 6.24 percent to end at NT$170.00.

Bucking the downturn, surgical mask maker Universal Inc. rose 6.20 percent to close at NT$28.25.

In the financial sector, which fell 0.80 percent, Fubon Financial Holding Co. fell 0.71 percent to end at NT$56.20, while Cathay Financial Holding Co. closed unchanged at NT$40.15.

“With the Taiex falling below the 120-day moving average today, the local main board has become technically fragile and more losses could follow with the next technical support expected at around 13,850 points, the 60-day moving average,” Huang said. “Investors better grab any technical recovery to reduce their holdings and keep more cash on hand during the current downtrend.”

Foreign institutional investors sold a net NT$10.66 billion worth of shares on the main board on Tuesday, according to the TWSE.