Taiwan stocks backed off from a seven-week high on Wednesday due to a fall in US markets and as the positive impact from an MSCI upgrade faded, though travel-related shares gained on hopes of better China ties. The TAIEX share index ended down 0.66 percent at 5,971.62, retreating after two days atop the important 6,000 point level as local investors bet the benefits from Morgan Stanley Capital International's (MSCI) Taiwan upgrade are ending.
"MSCI becomes effective today, and that combined with falling US shares to spark strong selling from local investors," said Richard Tsai, a vice president at Grand Cathay Securities. But it seems foreign investors are still buying electronics shares and tourism shares also were back in favour, said Tsai.
MSCI's re-weighting of Taiwan had boosted large-cap blue chips like Taiwan Semiconductor Manufacturing Co in recent weeks.
TSMC, the index's most heavily weighted issue, fell a sharp 1.76 percent to close at T$55.9, but was still up more than 12 percent in just over five weeks of trading.
Smaller rival United Microelectronics Corp (UMC) ended down 0.24 percent at T$21.15, after losing some 2.4 percent in intraday trading.
As the anticipation of the MSCI upgrade faded, investors moved out of big caps and into smaller peers.
Compeq Manufacturing Co Ltd, a small maker of printed circuit boards used mainly in cellphones, jumped the daily maximum of seven percent to T$11.15, and has gained 26 percent in the past month of trading.
The small cap was one of the most actively traded issues, but overall trading volume was moderate at T$79.6 billion.
The weakness in the tech heavyweights pulled the overall electronics subindex down 0.73 percent.
Foreign investors have bought over US $4 billion worth of Taiwan stocks over the past five weeks in anticipation of MSCI's raising of Taiwan's weighting, which took effect after trade closed on Tuesday.
As China offered more concessions to Taiwan on Wednesday, investors saw bargains in the tourism sector, which jumped 6.89 percent on the day.
The tourism index has gained 21 percent in May on reports that Beijing was considering easing restrictions on Chinese tourists coming to Taiwan.
Earlier in the day, China announced it would drop tariffs on imports of 15 fruits from Taiwan, a concession made at the end of a historic visit by the leader of the island's opposition Nationalist Party or Kuomintang.
Buying spread to other travel-related issues such as China Airlines Ltd, the island's top carrier, which shot up 2.87 percent to T$17.95.
The over-the-counter TAISDAQ exchange added 0.91 percent to close at 116.97, and June TAIEX index futures almost halved its discount with the main market with a smaller 0.13 percent fall to 5,935 points.
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