The main stock market slumped last year, hurt by geopolitical tensions, aggressive interest rate hikes by the US Federal Reserve and weaker demand in the electronics sector in the second half of the year.
The TAIEX closed higher on Friday, the last trading day of last year, gaining 52.67 points, or 0.37 percent, to end the year at 14,137.69.
However, that was down 4,081.15 points, or 22.4 percent, from the end of 2021, pushing down market capitalization by about NT$12.16 trillion (US$395.99 billion) to NT$44.27 trillion.
Photo: CNA
That precipitous decline in market capitalization averaged out to a loss of about NT$1 million for each of the 12 million investors who have accounts to trade shares on the Taiwan Stock Exchange, after they made an average profit of NT$960,000 in 2021, when the TAIEX soared 23.7 percent year-on-year.
The first few days of last year seemed promising, with the TAIEX hitting a historical intraday high of 18,619.61 on Jan. 5.
However, it began a pullback over concerns that valuations were too high, and downward pressure accelerated after Russia invaded Ukraine on Feb. 24, sending the TAIEX down to about 16,764 in early March.
In April last year, the Omicron variant of SARS-CoV-2 started spreading in the nation, hurting domestic economic activity and sending the TAIEX even lower to 15,616.68 at the close on May 12.
The worst was still to come. After raising its key interest rates by 25 basis points in March and by an additional 50 basis points in May to stem inflation, the Fed turned even more hawkish when various measures of inflation remained stubbornly high.
It pushed through 75 basis-point hikes after each of its policymaking meetings in June, July, September and November last year, and added a 50 basis-point hike last month, sending global stock markets into a tailspin.
With global markets, and by extension Taiwan’s markets, turning volatile, the National Financial Stabilization Fund’s governing committee authorized the fund on June 12 to intervene to shore up share prices.
The NT$500 billion stabilization fund was set up in 2000 by the government to serve as a buffer against unexpected external factors that could disrupt local stock markets.
In addition, escalating tensions across the Taiwan Strait created downside risks to the TAIEX.
Those factors resulted in the TAIEX falling to an intraday low last year on Oct. 25 of 12,629.48, down 30.7 percent from the beginning of the year. It rebounded by more than 2,500 points in November before entering consolidation mode last month.
Dealers said the Fed’s aggressive moves led foreign institutional investors to move funds out of the region and into US dollar-denominated assets to take advantage of higher bond yields on US markets.
Those higher yields made tech stocks, which generally pay out relatively low dividends, less attractive, hurting listed Taiwanese electronics companies, especially Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the most heavily weighted stock on the local market.
Last year, TSMC shares plunged NT$166.50, or about 27 percent, to close at NT$448.50, as foreign institutional investors were net sellers of more than 1 billion shares of the stock.
By the end of last year, foreign institutional investors accounted for about 70 percent of TSMC’s outstanding shares, down from 75.06 percent a year earlier.
While the number of TSMC shareholders who owned 1 million shares or more fell by 60 as of Dec. 23 from the beginning of last year, the number of small retail investors who bought TSMC in odd lots — orders of fewer than the standard 1,000-share lots — rose more than 300,000.
At the same time, the number of smaller investors who owned 1,000 to 5,000 shares also rose by 160,000 people from the end of 2021.
Despite TSMC’s volatility, Warren Buffett-run Berkshire Hathaway Inc reported to the US Securities and Exchange Commission in November last year that it owned about 60.1 million TSMC American depositary receipts valued at more than US$4.1 billion as of the end of the third quarter.
Analysts said the investment by Buffett demonstrated his long-term confidence in the world’s largest contract chipmaker, which is extending its reach overseas, building wafer fabs in the US and Japan.
In addition to Buffett, TSMC chief executive officer C.C. Wei (魏哲家) bought 400,000 shares of the company from the open market in October and November last year to demonstrate his faith in TSMC.
Capital Securities Corp (群益金鼎證券) analyst Liao Chien-yu (廖健佑) said light trading on the exchange is expected to continue before the Lunar New Year holiday, which would start on Jan. 20 and run through Jan. 29.
Investors should pay attention to ongoing inventory adjustments in the global electronics industry and trends in the US economy in response to the Fed’s large rate hikes as indicators for their investing strategy in early this year, Liao said.
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