Taiwan stocks fell 0.23 percent on Wednesday, hurt by losses in microchip heavyweights such as TSMC, after a brokerage downgrade of semiconductor companies pulled US peers lower.
The main TAIEX share index ended down 13.67 points at 5,931.38, taking a breather after a two-day rebound from a four-month low. Turnover was soft at T$65.77 billion ($1.98 billion).
"Small-cap or high-priced growth stocks were the major target for buying by local fund managers," said Alex Huang, vice president at Barits International Securities, who said broader market sentiment was still weak.
The technology sub-index finished 0.07 percent lower but domestic fund managers were seen buying high-priced growth stocks to boost performance before their books close for the third quarter.
Taiwan Semiconductor Manufacturing Co (TSMC), the world's top contract chip maker, slid 0.58 percent to T$51.20 and smaller rival United Microelectronics Corp (UMC) gave up 1.25 percent to T$19.70.
Meanwhile, worries over a supply glut of panels for computers and flat-screen TVs drove investors away from display makers.
AU Optronics Corp, the world's third-largest maker of thin displays, lost 0.6 percent to T$41.55 and smaller competitor Chi Mei Optoelectronics Corp was flat at T$36.40.
But memory chip maker Nanya Technology Corp rose 1.55 percent to T$19.60 following news that Inotera Memories Inc, a 50-50 joint venture between Nanya and Infineon plans to list in Taiwan.
Smartphone maker High Tech Computer Corp was another bright spot, rising 1.87 percent to T$382.00 after Merrill Lynch raised its earnings forecasts for the company.
On the non-tech side, investors scrambled to sell cyclicals such as steel and paper shares, on worries over demand and product prices in the coming months. China Steel Corp, the island's top steel producer, shed 2.18 percent to T$29.10 and Taiwan Pulp and Paper lost 0.65 percent to T$6.12.
The over-the-counter market's TAISDAQ index edged up 0.19 percent to 114.05, while October TAIEX index futures inched down 0.03 percent to 5,933.