Taiwan stocks seen lower on shaky tech outlook

Taiwan stocks are expected to extend a two-month low this week because investors are nervous about the outlook for the tech industry.
Taiwan's main TAIEX share index fell 4.6 percent to end at 5,502.14 last week as microchip heavyweights took a beating following recent chip downgrades by several investment houses, including Smith Barney and Merrill Lynch.
The index has seesawed in a 300-point range over the past month due partly to caution over a slew of quarterly earnings reports from major US tech firms.
"Q3 profit growth should be slower than we had expected. With poor sentiment on the tech sector, more downside is likely," said Maggie Chien, consultant at Capital Investment Management.
Chien did not rule out the index falling to as low as 5,200 points, near a one-year low, by the end of July.
With concerns that tech demand will fall short of previously upbeat forecasts for the second half, traditionally the annual peak manufacturing season, recent selling in display makers such as AU Optronics Corp is likely to continue.
AU, the world's third-largest maker of liquid-crystal displays (LCDs), is seen posting strong second-quarter earnings next Thursday but analysts fret that over-capacity will appear in the next six months.
AU shares have fallen about 23 percent since Deutsche Bank downgraded AU and Chi Mei Optoelectronics Corp in early June.
Up the production chain, investors will also avoid semiconductor shares such as Taiwan Semiconductor Manufacturing Co and United Microelectronics Corp after Smith Barney downgraded them to "sell" from "buy" last week.
On the consumer front, the world's number-one mobile phone maker, Nokia Oyj, warned on Thursday that earnings would fall further after reporting a drop in second-quarter profits, which was bad news for the firm's Taiwan suppliers.
On Friday, shares in Hon Hai Precision Industry Co, which assembles phones for Nokia, fell 0.85 percent to T$116 and those of Ichia Technologies Inc slumped 7 percent to T$63.5. Ichia produces phone keypads for Nokia.
While techs weaken, other industrials could become defensive plays.
"Non-tech industrials have risen recently. If the outlook for the tech sector remains unclear, they will continue to attract buying," said Richard Tsai, vice president at Grand Cathay Securities.
Asia Cement, for example, has risen 14 percent over the past month as steel rebar maker Tung Ho Steel has shot up 24 percent.
The tech sub-index has fallen some 6.1 percent over the same period.