Enhanced US-China trade relations positively influence local stock markets.
Rewritten Article:
By Crystal Hsu / Staff Reporter, with CNA
Stock markets in Taiwan soared yesterday, with the TAIEX leaping 200.6 points, or 0.95 percent, to close at 21,330.14. This surge follows significant gains on Wall Street overnight, where the tech-heavy NASDAQ Composite surged over 4 percent, the S&P 500 jumped 3.3 percent, and the Dow Jones Industrial Average increased 2.8 percent. What triggered this positive movement?
The encouraging US-China tariff cut, which sent US markets soaring overnight, is the primary cause. Alex Huang, an analyst at Mega International Investment Services Corp, explained, "The US-China significant tariff cut was uplifting, so US markets jumped overnight, and the Taipei market just followed today."
The bellwether electronics sector took the lead in the upturn, rising 1.17 percent. Shares in contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC) rose 1.25 percent to close at NT$969, adding to the sector's momentum, as per Huang.
The upcoming Computex Taipei trade show sparked investor interest in AI-related tech stocks, with hopes of positive leads from the annual tech exhibition. Shares of Hon Hai Precision Industry Co (also known as Foxconn), a key supplier of AI servers and an assembler of Apple Inc's iPhones, rallied 3.27 percent to NT$158.
The US-China trade truce stands to benefit Hon Hai the most, as around 75 percent of its production facilities are in China. While the company is diversifying its production bases, its Chinese facilities remain crucial, particularly the Zhengzhou site (the world's largest iPhone manufacturing site) and the Shenzhen plant, which serves as a hub for iPhone research and development and pilot production.
Other electronics suppliers, such as Quanta Computer Inc (廣達電腦), Inventec Corp (英業達), Wistron Corp (緯創), Pegatron Corp (和碩), and Compal Electronics Inc (仁寶), also stand to gain from reduced tariff pressures. The extent of these gains depends on various factors, including the location and nature of their production facilities. For example, Compal's Chinese factories accounted for 70 percent of its total output last year, while Wistron's Chinese operations account for less than 50 percent, as the company diversifies globally.
With US-China tariffs reduced to 30 percent and 10 percent, respectively (from the previous 145 percent and 125 percent), pressure on the Apple supply chain and notebook production lines has been significantly alleviated, allowing these manufacturers to continue their operations more smoothly.
In summary, the US-China trade truce has provided a much-needed boost to Taiwan’s major contract electronics manufacturers. These companies, led by Hon Hai Precision Industry Co and including Quanta, Inventec, Pegatron, and Compal, are experiencing immediate operational and financial relief from lower costs, eased inventory and production stress, and improved market sentiment. This reprieve offers these companies a chance to stabilize their businesses amid more predictable trade conditions. [Sources: 1, 2, 3, 4, 5]
The positive movement in Taiwan's stock market, as evidenced by the TAIEX's 0.95 percent rise, can be attributed to significant gains on US markets due to the US-China tariff cut, with the tech-heavy NASDAQ Composite surging over 4 percent. This rise in the tech sector, driven by companies like Taiwan Semiconductor Manufacturing Co and Hon Hai Precision Industry Co, is a result of the US-China trade truce, which is expected to beneficially impact the broader finance and business sectors, particularly technology companies.
