Taiwan stocks edged down 0.15 percent on Tuesday, a day after hitting a 25-month high, as higher oil prices triggered jitters that hotel shares' 17 percent rally in two weeks had been overdone.
But tech shares such as High Tech Computer Corp finished higher on expectations of solid earnings growth in the second quarter, analysts said.
The benchmark TAIEX slid 10.63 points to 6,989.46 points, driven by 0.16 percent rise in the electronics sub-index and a 2.54 percent drop in the tourism sub-index.
"There are two things hitting the market: the rise in oil prices and the psychological pressure on investors" with the index trading around 7,000 points, said Clare Sun, who manages T$4 billion (US $123 million) for Barits International Securities' propriety trading department.
The index could correct to as low as 6,600 points in the short term, Sun said, "but it will rise back to above 7,000 thanks to tech companies' strong earnings potential in the second quarter."
Trading was at T$110 billion (US $3.4 billion), compared with T$126.4 billion a day ago. Tourism and hotel shares fell, but the tourism sub-index was still 17 percent higher than at the beginning of the month, beating a 5.7 percent gain of the main index.
Leofoo Development slid 2.21 percent to T$19.90. Ambassador Hotel was down 2.37 percent at T$30.90.
Tech shares with solid fundamental potential jumped. Smartphone maker High Tech rose 4.75 percent to T$949 and topped the most active list by turnover. Taiwan Semiconductor Manufacturing Co, the world's biggest contract chip maker, was up 0.15 percent at T$67.90.
Energy-alternative stocks rallied on hopes they would benefit from rising oil prices. US crude oil futures rose further above $70 on Tuesday, hitting their highest in seven-and-a-half months.
Taiwan's largest solar maker, Motech Industries, was the third-most active by value and ended 3.98 percent higher at T$810. Wafer Works Corp, which makes materials used in solar cells, rose by the maximum 7 percent limit to T$47.90.
Nanya Tech, one of Taiwan's largest makers of dynamic random access memory (DRAM) chips, finished 0.74 percent higher at T$20.35. Nanya and rival Inotera Memories are set to report their first-quarter results later on Tuesday. Inotera ended 1.8 percent higher at T$36.50.