Taiwan stocks fell 1 percent on Tuesday, retreating from the last session's more than 3-month high close as major electronics shares such as UMC followed their US counterparts lower.
The TAIEX share index ended down 64.33 points, or 1.04 percent, at 6,139.51, giving up nearly all of Monday's 1.23 percent rise. Turnover eased to T$83.76 billion, down from 102.12 billion in the previous session.
United Microelectronics Corp (UMC) fell 3.13 percent in heavy trading after the US Philadelphia Semiconductor Index dropped 1.21 percent on Monday amid fears strong holiday consumer demand was coming at the expense of heavy price cuts.
"US markets took news about holiday sales as a negative factor, so it seems Taiwan was a little bit over-optimistic yesterday," said Alex Huang, vice president in charge of research at Barite Securities.
"There was a pullback today without too much selling pressure, but there is one thing we have to watch if US markets continue to fall, you can be sure foreign net buying of Taiwan stocks will also decline," Huang said.
Foreign investors have been net buyers of a whopping T$169.3 billion in local stocks this month, not including on Tuesday's session, more than any month this year.
Much of the day's drop came in the final moments of trading, and analysts said the sharp fall may have been a bid to sway the final settlement price of MSCI Taiwan Index futures traded in Singapore.
The November contract fell 1.74 percent to end at 259.2, with the spot price losing 1.36 percent to close at 259.14.
Display screen makers that showed sharp gains on Monday gave back some of their advance. World number three display panel manufacturer AU Optronics Corp fell 2.28 percent to close at T$47.20, while its chief local competitor, Chi Mie Optoelectronics Corp, fell 1.22 percent to T$40.50.
Suppliers for Microsoft Corp's Box 360 game console bucked tech sector losses amid reports that the new system already was sold out at many locations in the United States.
Microchip supplier Silicon Integrated Systems was the most active issue and gained 0.43 percent to T$23.35, while contract manufacturer Western Corp rose 0.5 percent to T$40.60, though both ended off highs.
Government-controlled Taiwan Business Bank jumped 2.95 percent to T$8.38 in busy trading as the government moves into the home stretch for its goal of halving the number of state-run banks through mergers before the end of this year.