Taipei, Aug. 14 (CNA) Shares in Taiwan moved sharply lower Monday amid fears that debt-ridden Chinese property giant Country Garden will trigger a financial crisis and send regional currencies lower against the U.S. dollar, dealers said.
The financial sector led the downturn in the wake of the Chinese property behemoth’s woes, and the bellwether electronics sector also struggled as investors dumped large-cap tech stocks after a sell-off of their U.S. counterparts at the end of last week, dealers said.
The Taiex, the Taiwan Stock Exchange’s weighted index, ended down 207.59 points, or 1.25 percent, at 16,393.66 after moving between 16,307.28 and 16,585.41. Turnover totaled NT$321.41 billion (US$10.06 billion).
The market opened down 15.84 points and selling soon escalated and continued to the end of the session as other regional markets such as Tokyo and Hong Kong tumbled amid growing concerns that Country Garden will spark a systematic financial crisis.
Investors were particularly nervous after the company announced on Friday that it would suspend the trading of 11 of its onshore bonds, dealers said.
Country Garden had racked up about 1.4 trillion Chinese yuan (US$192 billion) in liabilities as of the end of 2022, and faces 7.8 billion yuan in payments on notes and bonds in September.
“Many investors in the region fear County Garden’s massive debts will trigger a financial crisis in China similar to the one caused by a collapse of Lehman Brothers (in 2008) in the U.S.,” Hua Nan Securities analyst Kevin Su said.
“With the Country Garden crisis growing, the Chinese yuan could fall sharply against the U.S. dollar and trigger a domino effect in the region, sending other regional currencies lower. That could lead to foreign funds exiting from the region,” Su said.
“Weakening liquidity is the last thing investors want to see. So, today, they simply cut their holdings, and took the money and ran,” Su said.
Su said the financial sector, which closed down 1.88 percent, came under the heaviest pressure.
Fubon Financial Holding Co. fell 2.29 percent to close at NT$63.90, and Cathay Financial Holding Co. shed 2.26 percent to end at NT$45.40.
In addition, China Development Financial Holding Co. lost 2.02 percent to close at NT$12.15, and Mega Financial Holding Co. ended down 1.59 percent at NT$37.05.
“Concerns over inflation in Washington continued to hurt tech stocks in the U.S. Friday so electronics heavyweights in Taiwan followed suit and moved lower today,” Su said, referring to the July Producer Price Index (PPI), which rose 0.3 percent from June, the highest monthly increase since January.
“Amid lingering worries over inflation, the benchmark 10-year treasury yield in the U.S. has hovered above 4 percent in recent sessions, which made many tech stocks less attractive,” Su said.
In the electronics sector, which lost 0.81 percent, contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) closed 0.92 percent lower at NT$541.00, and United Microelectronics Corp., another contract chipmaker, ended down 0.77 percent at NT$45.00.
The semiconductor sub-index finished down 0.99 percent.
“TSMC continued to consolidate amid ongoing inventory adjustments in the global semiconductor industry. Without a stronger TSMC, the Taiex’s weakness could continue,” Su said.
He expected TSMC shares to test the nearest technical support around the 120-day moving average of NT$538.00 in the short term.
Among other semiconductor stocks, smartphone IC designer MediaTek Inc. lost 1.03 percent to close at NT$672.00, and IC packaging and testing services provider ASE Technology Holding Co. dropped 0.90 percent to end at NT$109.50.
“The bright side was that select stocks related to artificial intelligence development bucked the downturn and lent some support to the tech sector,” Su said.
AI server supplier Quanta Computer Inc. gained 6.94 percent to close at NT$239.00, and rival Compal Electronics Inc. rose 6.50 percent to end at NT$32.75, while Wistron Corp., another AI server maker, lost 3.04 percent to close at NT$111.50.
Also in the electronics sector, iPhone assembler Hon Hai Precision Industry Co. rose 1.38 percent to end at NT$110.00 after local media reported earlier Monday that the company received large orders for AI servers.
Selling was also seen among old economy stocks, with Formosa Plastics Corp. falling 1.19 percent to close at NT$83.00 and Nan Ya Plastics Corp. dipping 1.29 percent to end at NT$68.70.
In addition, textile maker Far Eastern New Century Corp. lost 0.68 percent to close at NT$29.30, while food brand Uni-President Enterprises Corp. rose 0.69 percent to end at NT$72.80.
According to the Taiwan Stock Exchange, foreign institutional investors sold a net NT$19.10 billion in shares on the market Monday.
