TAIEX below 8,000 points; MediaTek hit by price war
Taiwan shares fell below the 8,000 point mark Thursday morning amid cautious sentiment toward the market’s future movements after a recent sell-off caused by concerns over the local economic fundamentals, dealers said.
Among the falling stocks, shares of integrated circuit maker MediaTek Inc. (
) was hammered by reports which said that price competition in the China market has been escalating, which raised worries over the Taiwanese firm’s profit margin due to weakening pricing power, they said.
As of 10:52 a.m., the weighted index on the Taiwan Stock Exchange had fallen 0.33 percent to 7,995.18 points on turnover of NT$45.89 billion (US$1.42 billion). Shares of MediaTek had lost 1.53 percent to NT$257.00 with 8.50 million shares changing hands.
The local main board opened lower to fall below 8,000 points in the wake of the losses incurred on Wall Street overnight before some bargain hunting emerged to push the index back up to that level at one point, dealers said. But, selling reemerged soon to send local shares below 8,000 points again, they said.
“Following the recent steep downturn, the local equity market has become technically fragile and investor confidence has been eroded,” MasterLink Securities analyst Tom Tang said. “Even though the index had staged a mild rebound, a downtrend remained intact.”
Tang said that bargain hunting seen during the Thursday session could come from government-led funds in a bid to help the index return to the 8,000 point level, but the efforts failed. “The market cannot rely on buying from the government-led funds only. Unless investor confidence is restored, the market is likely to incur more losses.”
Since April 27, when the weighted index on the main board hit a 2015 high of 9,973.12 points, the local market has fallen almost 2,000 points or more than 19 percent as of Wednesday. On Wednesday alone, the index lost 1.9 percent.
Global Demand on the Decline
“Investors have turned downbeat about the local economy. There are rising fears that with global demand on the decline, Taiwan’s economy could grow at a pace of less than 1 percent for 2015, lower than the government’s estimate,” Tang said. Last week, the government trimmed its forecast for Taiwan’s 2015 economic growth to 1.56 percent from an earlier estimate of a 3.28 percent made in May.
“Haunted by a gloomy attitude toward the economy, it is possible for the index to fall further to test the next technical support at around 7,800 points,” Tang said.
IC Designer Price Cut
Among the falling large-cap stocks, shares of MediaTek encountered selling after the local media reported Thursday that the Taiwanese IC designer has staged a price cut for its smartphone chips in China to gain a larger share of the mainland market. In China, demand for smartphones has been weakening.
“Such price cut reports did not surprise me at all. MediaTek is faced with fierce competition not only from U.S.-based rival Qualcomm Inc. but also from its Chinese competitor,” Tang said, referring to China’s Spreadtrum Communications Inc.
The reports said that prices of MediaTek’s smartphone chips could fall 5-10 percent in the third quarter, a steeper fall than an earlier market estimate of 3 percent.