Taiwan stocks fell 3.34 percent on Monday, their biggest daily percentage drop in nearly two months, as cautious investors sold tech shares such as TSMC and UMC before they report May sales later this week. The main TAIEX share index finished 228.72 points lower at 6,628.02, its weakest close since May 18. The TAIEX has risen about 56 percent since touching the year's trough in January.
Turnover was moderate at T$147 billion ($4.5 billion), rising from T$94 billion on Saturday, when the markets were open to compensate for an extra holiday last week for the Dragon Boat Festival. Shares of Taiwan Semiconductor Manufacturing Co (TSMC), the world's top contract chip maker, fell 2 percent, dragging the semiconductor sub-index 3 percent lower.
TSMC's smaller rival United Microelectronics Corp (UMC), shed 5.78 percent, giving up all the ground it gained in the previous session after Taiwan said it was considering allowing local firms to set up advanced wafer fabs in China.
UMC and TSMC will report May sales figures on Tuesday and Wednesday, respectively. Taiwan companies are required to release May sales figures by June 10. "Investors, especially foreign investors, were selling stocks after gains on Saturday and a recent rally," said Tu Jin-lung, chairman of Grand Cathay Investment Services.
"Technology companies' May sales won't be too good compared with the figures last month. Their second-quarter gross margins probably will be weak as well due to the stronger Taiwan dollar during the period," said Tu, who expected the market to trade as low as 6,339 points this week.
A strong local currency usually causes forex losses for exporters when they convert overseas earnings back home. Smartphone maker HTC, the day's most active share by turnover, slid 5.9 percent after its May sales rose 9.4 percent from a month ago, below market expectations.
However, LCD shares outperformed on hopes of rising demand from China. China said last week its TV companies were expected to buy a total $4.4 billion worth of LCDs from Taiwan this year. Shares of AU Optronics and Chi Mei Optoelectronics, the island's top two flat-panel makers, rose 0.14 percent and 1.24 percent, respectively.
DRAM shares were mixed after Taiwan's economics minister said the Japanese government would invest in the new computer memory chip firm set up by the Taiwanese government to overhaul the DRAM sector, Taiwan Memory Co (TMC).
"The news would have had a greater impact on shares if the market hadn't risen so much. Short-term effects from the news will be limited as investors now focus more on the fundamentals of the economy," said Andrew Deng, an assistant vice president of Taiwan International Securities. Shares of Powerchip, Taiwan's largest DRAM maker, dropped 1.79 percent. Smaller rivals Nanya Tech fell 1.8 percent while ProMOS rose by its daily limit of 6.52 percent.
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