Taiwan stocks seen weaker, eye on sales reports

Taiwan stocks could pull back this week as expected weak August revenues add to worries over Intel Corp's unexpected sharp cut in forecast sales weighs on heavyweight tech stocks that had led a recent rally.
The TAIEX index hit its highest close in nearly three months on Wednesday but then tumbled after the Intel forecast hit chip makers like UMC, to end down 0.63 percent for the week.
Analysts say August sales reports by listed firms, which are due by September 10, are likely to be mostly weak due to two working days lost to a typhoon and poor back-to-school electronics sales in the United States, the tech sector's top market.
"The typhoon and the shortage of water that followed were unexpected factors in August," said Richard Tsai, senior vice president of research at Grand Cathay Securities.
"Even though many companies are already saying business is coming back in September and October, August sales could be an excuse to pull back," he said.
Markets and businesses were closed on August 24 and 25 when Typhoon Aere hit North Taiwan, causing damage that led to water rationing in parts of island.
Despite a cautious mood, trading was nonetheless picking up last week with daily turnover hitting T$90 billion or more.
Top contract microchip makers Taiwan Semiconductor Manufacturing Co and United Microelectronics Corp (UMC) are expected to post record revenues in August. But their shares, which both fell more than 3 percent on Friday after the Intel forecast, are unlikely to get much of a boost as investors now fear business may slow down in the fourth quarter.
The move out of electronics could benefit industrials.
"People will still be looking at defensive traditional industry stocks," said Daniel Tseng, manager in charge of sales to institutional investors at Fubon Securities.
Blue chip industrials like China Steel, Nan Ya Plastics and Taiwan Cement could serve as a safe harbour from investors wishing to stay in the game while avoiding risking tech shares, analysts said.
Investors may also be anxious to jump back into display screen makers like AU Optronics and Chi Mei Optoelectronics on signs that price cuts and slower capacity growth is helping to ease a supply glut.