TSMC shares extend losses amid sales concerns
Shares of Taiwan Semiconductor Manufacturing Co. (TSMC, ) extended losses from a session earlier Thursday morning as HSBC Securities cut a forecast for the world’s largest contract chipmaker’s sales growth rate, citing higher customer concentration risks, dealers said.
The current selling is likely to have come from foreign institutional investors, which raised the number of net shortposition contracts in the futures market and tended to cut holdings in large-cap stocks, like TSMC, in the spot market for profit, the dealers said.
As of 11:51 a.m., shares of TSMC had lost 1.75 percent to NT$140.50 (US$4.56), with 36.83 million shares changing hands after a 0.69 percent fall seen a day earlier. The weighted index on the Taiwan Stock Exchange was down 2.07 percent at 9,358.81 points.
“After TSMC shares fell below the 120-day moving average at around NT$143.70, the stock has turned technically weaker,” Hua Nan Securities analyst Kevin Su said. “So such negative leads as the HSBC Securities report prompted investors to sell more.”
In a research note, HSBC Securities said that the global semiconductor indus- try has been in a merger mania, meaning that chip-makers, including TSMC and United Microelectronics Corp. (UMC, ), could have smaller customer bases. The worries were triggered by three recent merger and acquisition deals in the integrated circuit industry, worth more than US$70 billion.
Intel to Acquire Altera
The latest was a deal in which Intel announced June 1 that it had agreed to acquire Altera, a programmable logic semiconductor supplier, for US$16.7 billion. It was Intel’s biggest deal since 2011. As Altera is one of TSMC’s buyers, many investors fear that Altera will shift orders to Intel from TSMC, the dealers said.
There has been speculation that Intel has set its sights on Qualcomm Inc., another TSMC customer, for the next acquisition, the dealers added.
HSBC Securities said that although the latest three merger deals will have only a limited impact on TSMC, if such merger mania continues, the Taiwanese chipmaker could witness its customer base shrinking over the next few years. The brokerage said that TSMC’s sales growth rate over the next few years could range between 10 percent and 15 percent from a 20-30 percent increase over the past few years.
“Whether TSMC will suffer such a serious blow due to consolidation in the IC industry as the HSBC Securities forecast remains to be seen.
But the research note simply encouraged investors to sell for the moment amid cautious sentiment,” Su said.
Foreign Institutional Selling
Su said that the weakness of TSMC shares in recent sessions largely came from foreign institutional selling. Before Thursday, according to Su, foreign institutional investors had sold a net 69 million TSMC shares since the beginning of May, and during the period, the stock had lost 2.72 percent.
“As foreign institutional investors boosted the number of their net short position contracts yesterday, I think that they kept selling TSMC shares this morning,” Su said.
Su said that the stock could face more downward pressure until it moves to the nearest technical support level at around NT$140, so with TSMC shares’ weakness persisting, it is unlikely that the broader market will climb out of the current doldrums.
Premier Mao Chi-kuo, right, interacts with a company official yesterday at the 2015 COMPUTEX Taipei exhibition in Nangang. In attending the technology forum following the president’s visit earlier in the week, Mao tried out several new product releases and listened to company officials presenting their offerings.