Taiwan stocks fell 1.76 percent on Tuesday to a fresh four-month closing low, with LCD flat panel makers hit by a Merrill Lynch downgrade over worries of decreasing prices and a supply glut. Taiwan's main TAIEX share index closed down 138.37 points at 7,738.12, its lowest close since February 13.
The index has lost nearly 6 percent in four sessions. The broader electronics sub-index ended 1.88 percent lower. Turnover was moderate at T$92.87 billion ($3.05 billion) ahead of interest rate decisions from the US Federal Reserve and Taiwan later this week.
"The market will hit bottom in the third quarter, and it could fall to 7,300 points, because oil prices may continue to be high and domestic GDP growth could decrease from last year," said Michael On, Beyond Asset Management's managing director.
Shares of AU Optronics dropped 5.2 percent, and smaller rival Chi Mei Optoelectronics Corp fell 5 percent after Merrill Lynch downgraded its ratings on the two companies. BNP Paribas also said in a research note on Monday that LCD TV panel prices would decline this year on more supply, and that a monitor panel price hike since the end of the first quarter would prove short lived.
Top contract chip maker Taiwan Semiconductor Manufacturing Co Ltd (TSMC) rose 0.2 percent, while smaller rival United Microelectronics Corp (UMC) declined 0.3 percent, compared to a 1.4 percent fall in the semiconductor sub-index.
Shares of Cathay Financial, the top financial holding company, fell 1.9 percent as investors pocketed recent gains inspired by hopes of further opening to China. China Steel, the island's top steel producer, fell 1.3 percent after a report said the firm will continue to raise its prices in the third quarter if ore prices keep rising.
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