ADVERTISEMENT

Too Much Love for TSMC Proves Costly in Global Market Rout

Too Much Love for TSMC Proves Costly in Global Market Rout

(Bloomberg) -- Taiwan’s largest stock may be paying a price for being the darling of equity investors.

Heading into 2020, analysts and strategists were falling over themselves to outline reasons Taiwan Semiconductor Manufacturing Co. would continue to outshine global peers. Its market value rose another $13 billion in the opening two weeks of the year, with shares continuing to set record highs. Now, investors are sitting on an 8.8% loss for 2020 after TSMC notched its lowest close in four months Wednesday.

Too Much Love for TSMC Proves Costly in Global Market Rout

As TSMC shares are Taiwan’s biggest beneficiary of international cash, they’re also at the front of the line when foreigners pull back. As risk assets globally have slid to start 2020 due to the coronavirus outbreak, foreigners have sold more than $8 billion of Taiwan stocks, second most in Asian markets, according to data compiled by Bloomberg. Net foreign selling on Monday was $1.8 billion, according to exchange data, the most since 2007.

TSMC’s 2020 stock drop, in line with the Taiex index, has occurred even as company revenue grew strongly after a weak start to 2019. Combined sales for January and February were a record NT$197.1 billion ($6.6 billion), 42% higher than a year earlier. Analysts see TSMC remaining on track to meet the better-than-expected revenue forecast given in January.

This quarter is too soon to see material virus-related impacts for the likes of TSMC because of the time it takes to make wafers, said Citigroup Inc., which predicts record March revenue of above NT$110 billion. It added that even if the company sees some second-quarter order cancellations, the spots could be immediately filled by excess orders TSMC has. That makes the firm “the most resilient of its peers.”

But Citigroup, as well as Daiwa Capital Markets, does say that TSMC will feel some pressure if the virus outbreak continues well into 2020. For now, though, Daiwa suggests investors “accumulate the stock on any weakness.”

To contact the reporter on this story: Cindy Wang in Taipei at hwang61@bloomberg.net

To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, Kevin Kingsbury, David Watkins

©2020 Bloomberg L.P.