Taiwan’s market fortunes tied to TSMC like never before


  • Corporate News
  • Friday, 18 Oct 2019

FILE PHOTO: A logo of Taiwan Semiconductor Manufacturing Co (TSMC) is seen at its headquarters in Hsinchu, Taiwan August 31, 2018.REUTERS/Tyrone Siu/File photo

TAIPEI: Taiwan’s largest stock is so dominant it’s even underpinning a surge in the local currency.

Of the more than US$4bil that foreign investors have sent into Taipei-listed equities this year, about 60% has landed with Taiwan Semiconductor Manufacturing Co. Inflows and the chipmaker’s gains his month helped the Taiwan dollar strengthen 1.4%. There are signs the stock, trading at its most expensive in a decade, is overbought.

TSMC makes up more than a fifth of the Taiex benchmark. Its prevalence shows just how much is riding on its fortunes. Apple Inc.‘s primary chip supplier reported better-than-expected earnings Thursday and gave an upbeat fourth-quarter revenue forecast. The stock was trading 0.7% higher on Friday morning.

The company influences Taiwan’s "stocks, foreign exchange, and the economy, ” said Yih-kuang Chen, chairman of First Capital Management Inc. Continued foreign inflows to TSMC shares "will boost the Taiwan dollar” and may cause concern at Taiwan’s central bank, he said.

Trading at nearly 20 times projected 12-month earnings, TSMC shares are at their most expensive in a decade. The stock is also showing signs of being technically overbought, defined as a reading of more than 70 on the 14-day relative strength index, which tracks the persistence and magnitude of price moves.

"Part of TSMC’s valuation now is supported by fund flow, ”said Peter Chan, analyst at CGS-CIMB Securities, whose reduce rating on the stock makes him one of its few bears. "But fund flow often hinges on geopolitical events.” He thinks the stock’s valuation is too high.

Its market cap surpassed $250 billion for the first time this week, putting it just behind Samsung Electronics Co. The stock has surged more than 19% since an August low, with a better-than-expected debut for the latest iPhones boosting sentiment toward companies in Apple’s supply chain. - Bloomberg

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