Semiconductor stocks fell globally on Tuesday as an expected visit by US House of Representatives Speaker Nancy Pelosi to Taiwan, which China claims as its territory, fueled a fresh escalation in tensions between Washington and Beijing .
China sees Pelosi’s visit as the second in the line of US presidential succession and a longtime critic of China, sending an encouraging signal to the pro-independence camp in Taiwan and repeatedly warning against it.
Taiwan is home to Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest manufacturer of semiconductors on contract. Shares of the company closed 2.4 per cent lower, while peer United Microelectronics Corp (UMC) declined 3 per cent.
Taiwan shares fell 1.6 percent, their biggest percentage drop in three weeks, while China shares posted their biggest fall in more than two months as rising tensions destabilized Asian financial markets.
“The outlook for business in Asia is likely to be weighted on semiconductors, given how much of the world’s global production comes from Taiwan,” said Michael Hewson, chief market analyst at CMC Markets UK.
Globally, semiconductor stocks felt the heat. Germany’s Infineon fell 2.3 per cent, while Dutch firms ASML, ASMI and BESI fell between 3 per cent and 4 per cent. US chip stocks such as Nvidia, Intel, Qualcomm and Micron each lost more than 1 percent before the bell.
“The market reaction is expected following the strong performance of equity markets in July,” said Andrea Scipione, head of strategy at TS Lombard in London.
“Unless the situation escalates, the long-term impact is unlikely to be significant, which I would not expect right now.”
Pelosi was set to visit the island on Tuesday, three sources said, as several Chinese warplanes flew close to the midline dividing the Taiwan Strait, one source told Reuters.
© Thomson Reuters 2022