Taiwanese stocks slumped, extending their biggest rout in more than a year, as the government tightened restrictions on people and businesses to control its worst outbreak of COVID-19.
Tech and non-tech sector stocks came under heavy pressure, while buying emerged in select biotech stocks and food suppliers, and some bargain hunting kicked in, helping trim the losses to less than 500 points by the end of the session.
“It’s possible some of the bargain hunting came from government-led funds to shore up market confidence amid COVID-19,” Mega International Investment Services Corp (兆豐國際投顧) analyst Alex Huang (黃國偉) said. “I also suspect some investors remained upbeat, thinking the impact of the raised alert will be short-lived. So after the TAIEX tested Wednesday’s intraday low, it started to recover.”
Photo: CNA
The TAIEX ended down 473.20 points, or 2.99 percent, at 15,353.89, as authorities urged companies to allow staff to work from home or split locations after reporting a record 206 new local cases on Sunday.
Taipei and New Taipei City are closing high schools, elementary schools and kindergartens until Friday next week to prevent the virus spreading, as Taiwan added 333 local COVID-19 cases yesterday, a fresh record.
Turnover on the main board totaled NT$480.19 billion (US$17.12 billion), while foreign institutional investors bought a net NT$33.42 billion in shares, Taiwan Stock Exchange data showed.
“Investors are worried, as school closures could mean the virus is spreading fast,” First Capital Management Inc (第一金證券投顧) chairman Edward Chen (陳奕光) said. “However, there’s no need to panic, as Taiwanese are vigilant in COVID prevention. It would be another story, though, if factory production lines are forced to stop.”
Forced selling might have also added volatility to yesterday’s trading, with the level of margin debt falling by a net NT$5.8 billion on Friday, according to exchange data compiled by Bloomberg.
That took the four-day drop in leverage to NT$39.4 billion, showing that traders faced margin calls by brokers to cover losses in their stock accounts.
“In light of rising concerns over the pandemic, we expect more volatility ahead, and advise to stick to defensive names with low P/E and high dividend yield,” said Patrick Chen (陳鈞寧), CLSA’s head of Taiwan research.
His team’s top picks include Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and Hon Hai Precision Industry Co (鴻海精密).
TSMC yesterday lost 1.44 percent and Hon Hai fell 6.03 percent.
Travel and consumption-linked names were among the big losers. Restaurant operators Gourmet Master Co (美食達人) and Wowprime Corp (王品集團) plunged almost 10 percent, while shares of Formosa International Hotels Corp (晶華國際酒店集團) and The Ambassador Hotel Ltd (國賓大飯店集團) slumped at least 4 percent.
Shares of food companies were among the few beneficiaries of the COVID-19 fears amid expectations that their sales would be boosted by the raised alert, with Ve Wong Corp (味王) and AGV Products Corp (愛之味) soaring 10 percent.
Biotech stocks also outperformed the broader market, with mask maker Universal Inc (恆大), vaccine developer Adimmune Corp (國光生技) and fast-test kit supplier Panion & BF Biotech Inc (寶齡富錦) all closing 10 percent higher.
“Although the selling was capped, investors should follow COVID-19 developments. If the number of cases continues to rise and further raises the alert level, the TAIEX is very likely to suffer,” Huang said.
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