Shares in Taiwan tumble, pulled lower by financial sector: dealers
Shares in Taiwan took a beating Wednesday, pulled lower by the financial sector amid fears that a weaker Chinese yuan will erode the value of the considerable yuandenominated assets held by local financial institutions, dealers said.
“Apple concept stocks” also faced heavy selling pressure, led by smartphone camera lens supplier Largan Precision Co. ( ), after Apple shares plunged overnight due to worries the yuan depreciation will lead to foreign exchange losses for the U.S. company, they said.
The weighted index on the Taiwan Stock Exchange (TWSE) closed down 110.76 points, or 1.31 percent, at 8,283.38, after moving between 8,235.95 and 8,376.59, on turnover of NT$95.45 billion (US$2.96 billion).
The market opened down 0.33 percent in reaction to heavy losses on Wall Street after the People’s Bank of China (PBOC) allowed the Chinese yuan to fall significantly by cutting the yuan’s reference rate against the U.S. dollar, dealers said.
Worries Over Yuan-denominated
Selling then escalated, with financial stocks particularly under pressure because of worries over the value of their yuan-denominated assets. Companies in the Apple supply chain also tumbled after a 5.2 percent fall in Apple shares overnight, they said.
“Before today’s plunge, Taiwan’s financial sector had outperformed the broader market in recent sessions. Investors simply seized on the yuan’s depreciation as a reason to lock in their gains on financial stocks,” Mega International Investment Services Corp. analyst Alex Huang said.
“I think the selling in the financial sector came mostly from foreign investors,” Huang said. According to the TWSE, foreign institutional investors sold a net NT$8.79 billion worth of shares on the stock exchange Wednesday.
The PBOC cut the yuan’s reference rate against the U.S. dollar by 1.62 percent Wednesday, after a 1.86 percent cut a day earlier. The PBOC’s set off a currency deprecation competition in the region.
Financial Sub-index Closed Down
The financial sub-index closed down 4.94 percent at 1,071.19. Among the losing financial stocks, Fubon Financial Holding Co. (
) lost 6.87 percent to end at NT$52.90, and rival Cathay Financial Holding Co. ( ) shed 7.09 percent to close at NT$46.55.
“The yuan’s depreciation is expected to hurt these financial institutions’ exposure to China,” Huang said.
“Today’s fall has made the financial sector technically weaker, and I expect that the financial sub-index could test the nearest technical support at around 1,040 points soon.”
Huang said Apple’s downturn dealt another blow to the local equity market by dragging down wanese suppliers.
Apple Concept Stocks
Among the Apple concept stocks, Largan, the most expensive stock on the local market, fell below the NT$3,000 mark again, ending 5.71 percent lower to close at NT$2,970.00.
Hon Hai Precision Industry Co. ( ) lost 2.26 percent to end at NT$86.50.
Outperforming the broader market, PC vendor Asustek Computer Inc. ( ) rose 9.38 percent to close at NT$274.00 after the company reported better-than-expected earnings for the second quarter.
“The weaker yuan has led other regional currencies, including the Taiwan dollar, to move lower,” Huang said.
“The latest selling in the local equity market also reflected fears that foreign investors will move their funds out of the region due to the weakness of the regional currencies, which could further hurt share prices,” he said.
A woman monitors the Taiwanese stock market in Taipei, yesterday. Firms dependent on the Chinese market, such as Apple Inc., are reeling from the impact of the Chinese yuan plunge. Meanwhile, the devaluation of the New Taiwan Dollar has affected shares of local firms like Fubon Financial Holding Co. ( ). The local index Taiex decreased by 110.76 points to close below 8,300.