TAIPEI — Taiwanese technology stocks experienced a significant downturn on Monday after U.S. President Joe Biden announced he would be withdrawing from the presidential race. This political shift has added further uncertainty to Asia’s chip technology sector.
The Taiex index, which had surged nearly 28% this year by July 19, closed the day down 2.68%, having dipped over 3% at one point during the session.
Key Tech Stocks Suffer Losses
Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s leading contract chipmaker, saw its shares fall by more than 3% in Taipei. MediaTek, the top mobile chip developer globally by shipments, experienced a 2.77% decline in its stock price. United Microelectronics Corp., Taiwan’s second-largest contract chipmaker, also saw a drop of over 3%, while ASE Technology Holding, the largest chip packaging and testing provider worldwide, fell just over 4%.
Foxconn, a major Nvidia AI server manufacturer, experienced a 5.63% plunge in its stock price, falling below NT$200. The iPhone assembler, under the leadership of former Chairman Terry Gou, had announced a $10 billion investment in a Wisconsin display manufacturing facility in 2018, a project lauded by former President Donald Trump as the “eighth wonder of the world.” However, the investment was significantly scaled back, and the plant did not come to fruition. Recently, President Biden criticized Foxconn for failing to meet its investment commitments.
Broader Market Impact in Asia
Elsewhere in Asia, market declines were less severe. Shanghai and Shenzhen markets closed down by less than 1%, while Japan’s and South Korea’s benchmarks dipped slightly over 1%.
Geopolitical Concerns Affecting Markets
Tech stocks in Taiwan and across Asia had also declined late last week following comments from Republican presidential candidate Donald Trump. In an interview with Bloomberg, Trump suggested that Taiwan should financially contribute to the U.S. defense umbrella, stating that the island “did take about 100% of our chip business.”
Last Thursday, TSMC reaffirmed its commitment to its investment plans in Arizona, indicating no intention to pursue joint ventures in the U.S. to mitigate geopolitical risks. This statement was in response to analyst inquiries about Trump’s remarks concerning Taiwan’s chip industry.
Analyst Insights
Jeff Pu, managing director of tech research at Haitong Securities, told Nikkei Asia that the current decline in tech and chip-related stocks is primarily due to Biden’s withdrawal from the race and investor concerns over escalating geopolitical uncertainties.
“However, another fundamental reason is that tech hardware stocks have risen too sharply, too quickly,” Pu said. “Many valuations are already high. Taiwan’s tech stocks fell more than the regional market because Trump’s comments about Taiwan paying for its defense impact global investors’ perspectives on Taiwan’s stock market. Additionally, the significant drop in the New Taiwan dollar indicates that foreign investors are adjusting their shares to maintain a balance.”
Despite these short-term corrections, Pu maintains a positive outlook for the tech industry.
Jonah Cheng, chief investment officer at J&J Investment, noted that Taiwan’s market has seen substantial gains since the start of the year, making it particularly vulnerable to negative news.
“The risks in the Taiwan stock market have been high recently, especially for high-valuation stocks,” Cheng told Nikkei Asia. “Any negative news can trigger selling pressure. Biden’s withdrawal is the latest trigger, and it’s uncertain how long this selling pressure will persist.”
Cheng highlighted that foreign institutional investors and insurance companies sold Taiwan stocks earlier in July, likely as part of profit-taking strategies. This left the market more volatile, driven mainly by short-term and individual investors.
Phelix Lee, equity analyst at Morningstar, described the day’s movements as a mix of profit-taking and “geographical rotation” by investors, prompted by Trump’s comments on Taiwan last week. “The market is likely pricing in a higher chance of a Trump victory, which has triggered a risk-off mode today.”
Lee added that companies selling directly to Chinese customers might face challenges with potential new licensing requirements. He predicted continued volatility as Trump’s stance on Taiwan introduces more uncertainty into the market.
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