Taiwan stocks shed 3.23 percent on Tuesday, their worst one-day decline in three weeks, as losses on Wall Street and other global markets promoted investors to lock in profits from a recent rally in financial and tourism stocks. Weaker sales from local technology companies such as Hon Hai also raised concerns over the strength of the tech sector's nascent recovery.
The main TAIEX share index ended 214.95 points lower at 6,432.55, its weakest finish since May 5. Turnover was active at T$176.5 billion ($5.4 billion), but lower than Monday's T$189.6 billion.
The day's fall snapped an eight-session winning streak that had seen the market jump about 19 percent on optimism over potential investments from China. The banking and insurance sub-index dropped 5.49 percent after jumping about 70 percent since its March low as investors expected financial firms to become major beneficiaries from closer ties with China.
Cathay Financial, the island's top listed financial holding firm, lost 6.83 percent. Chinatrust Financial, Taiwan's biggest credit card issuer, slid 7 percent to its daily limit. "Losses in US stocks and other global markets triggered today's fall, especially as the local market has risen a lot in the past few sessions," said Robert Hsieh, a vice president of Shin Kong Investment Trust.
"Selling by foreign investors yesterday also weighed on the market." Foreign institutional investors sold Taiwan stocks on Monday, snapping a buying spree over the past 10 sessions.) Mega Financial and SinoPac Financial both fell more than 4 percent.
Shanghai-based Sino First Bank said it expected a premium of three to four times its current net value from investors looking to take a stake, a local newspaper reported, a day after a report said Mega Financial and SinoPac Financial were contemplating a joint bid for a stake.
The tourism sub-index lost 5 percent as China's first confirmed case of the new strain of flu, H1N1, spurred fears over the impact on business. Hotel operators Ambassador Hotel and Leofoo Development Co both slid more than 6 percent. In the tech sector, investors were getting cautious after many major local companies reported weak April sales. The electronics sub-index fell 3.22 percent.
Hon Hai Precision Industry, Taiwan's largest electronic parts maker and the day's second-most active share by turnover, ended limit-down after its April revenue fell from the month before. "As the previous rally helped by rush orders comes to an end, investors will now focus on the fundamentals of technology companies and buy stocks of the companies that have a better sales outlook," said Hsieh.