(Bloomberg) — Taiwan stocks plunged as concern over further tightening of coronavirus-linked restrictions and a global tech selloff spooked investors.
The Taiwan Stock Exchange Weighted Index was in freefall during mid-morning trading, slumping as much as 8.6% before paring the losses to 5.9% as of 12:22 p.m. local time. Heavyweight Taiwan Semiconductor Manufacturing Co. and Hon Hai Precision Industry Co. were among the biggest drags, and more than a hundred stocks on the gauge fell by the daily 10% limit.
Wednesday’s selloff marks a sharp turn for the equity index which ranked among Asia’s best performers before it started to retreat at the end of April. Taiwan may elevate its alert level on Covid-19 further today after banning large gatherings Tuesday, Taipei-based Liberty Times reported, citing health minister Chen Shih-chung.
The plunge prompted a move by the National Financial Stabilization Fund to hold an extraordinary meeting to decide whether to intervene, according a local media report citing deputy finance minister Juan Ching-hwa.
“Investor confidence in Taiex has collapsed now due to concerns over Covid-19 after health minister said it’s possible for Taiwan to escalate alert level for Covid-19,” said Paul Cheng, president of MasterLink Securities Investment Advisory. “And there are some concerns over tech shares especially for the second half outlook due to factors including rising manufacturing costs and lower margins.”
Local investors have turned increasingly wary as health authorities continue to battle the widening coronavirus outbreak that threatens Taiwan’s status as one of the safest places in the world to ride out the pandemic. Taiwan reported 11 new confirmed Covid-19 cases on Tuesday, following a biggest single-day jump in new cases this year on Monday, according to data compiled by Bloomberg.
“For a short-term correction, it is the perfect storm that you have a few events playing out: You’ve had strong interest and strong outperformance in the markets, the first signs of Covid and a bit of global skittishness and that couples with what you’re seeing,” said Randy Abrams, Credit Suisse Head of Taiwan Securities Research, on Bloomberg TV on Wednesday. “It’s a tech-heavy market and you’ve seen that shift from growth toward value.”
Still, some market watchers appeared to remain optimistic about stock benchmark, citing that the selloff was outsized compared to the relatively small number of new Covid-19 cases.
“Today’s market is overreacting,” said Li Fang Kuo, chairman of President Capital Management. “It is expected that today’s low point is already the bottom of this wave, and there will be a chance to rebound tomorrow. We are still optimistic about the overall Taiwan stock market.”
(Updates throughout)
For more articles like this, please visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2021 Bloomberg L.P.
