TAIPEI (Taiwan News) — Taiwanese shares plunged more than 450 points Thursday (Aug. 19) on fears the U.S. Federal Reserve could scale back its stimulus measures before the end of the year, according to market observers.

The weighted index, the key metric for the main board, opened lower and then dipped 450.87 points, or 2.68%, to finish at 16,375.4, the lowest level in recent sessions, with stocks for both regular and hi-tech companies suffering significant losses. Total turnover reached NT$431.276 billion (US$15.4 billion).

The release of the Fed's July meeting minutes on Wednesday, which suggested a possible end to stimulus measures this year, seems to have triggered the drop. However, this was not the only factor at work.

Analysts say the continued global chip shortage and the overnight fall of the PHLX Semiconductor Index below its quarterly moving average were also behind the plunge on the local bourse. Shares in Japan, South Korea and Hong Kong also dropped on Thursday.

Analyst Richard Wang (王兆立) said electronics equities, the mainstay of Taiwan’s stock exchange, lost 2.75% — on par with the hit taken by the market as a whole — which indicates investor confidence is being eroded across the board. The severe shortage of chips has also resulted in lower sales of some components and reduced inventories, Wang said.

With the weighted index ending below 16,400 points on Thursday, the market shed NT$1.37 trillion in capitalization. Foreign institutional investors engaged in net sales of NT$50.147 billion in Taiwanese stocks — the sixth highest level on record.

Alex Huang (黃國偉), an analyst with Mega International Investment Services Corp., said the Fed's suggestion it could rein in stimulus measures by the end of the year pushed up the U.S. dollar and caused stock markets in Taiwan, Japan and South Korea to fall.

Huang forecast foreign institutional investors will continue to allocate capital based on the stronger U.S. dollar and that will impact the Taiwan stock market.