Nancy Pelosi's Visit To Taiwan Angers China, Chip Conglomerate Shares Fall

Nancy pelosi during a visit to Taiwan. (photo: twitter @speakerpelosi)

JAKARTA - Semiconductor stocks fell globally on Tuesday, August 2 as US House of Representatives Speaker Nancy Pelosi's expected visit to Taiwan sparked a new escalation in tensions between Washington and Beijing.

China views the visit of Pelosi, a longtime critic of Beijing, as sending an encouraging signal to the pro-independence camp in Taiwan. Yet Beijing has repeatedly warned against it.

Taiwan is home to the world's largest chip or semiconductor contract manufacturer, Taiwan Semiconductor Manufacturing Co Ltd (TSMC), and partner United Microelectronics Corp (UMC). The company's shares fell 2.4% and 3%, respectively.

Taiwan stocks (.TWII) fell 1.6%, marking their biggest percentage drop in three weeks, while Chinese stocks posted their biggest declines in more than two months as geopolitical tensions escalated.

"Chip stocks are really exposed to Asia. Some of them, especially chip equipment companies, have 70% of their sales in the region, so it's a big deal for them," said Jack DeGan, chief investment officer at Harbor Advisory. .

US chip stocks including Nvidia Corp, Intel Corp, Qualcomm and Micron Technology Inc fell between 0.7% and 1.9%. The Philadelphia SE Semiconductor Index fell 1.1%.

In Europe, Infineon was down 1%, while Dutch firms ASML, ASMI and BESI were down between 2% and 3%.

"The long-term impact is unlikely to be significant unless the situation escalates, which would not be my expectation at the moment," said Andrea Cicione, chief strategist at TS Lombard in London.

Chinese warplanes were reported buzzing in the line that divides the Taiwan Strait last Tuesday shortly before Pelosi's arrival.

But shares of Xi'an Tian He Defense Technology Co., a Chinese defense equipment manufacturer, jumped 20 percent.