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TSMC stock hits 2-month high on recovery hopes

Optimism spreads to equipment makers as semiconductor slump appears over

The Taiwanese chipmaking powerhouse now expects higher profits for the July-September quarter after four consecutive declines.   © Reuters

TAIPEI -- Investors cheered Taiwan Semiconductor Manufacturing Co.'s assessment that the worst is behind the world's top contract chipmaker, sending its shares on Friday to their highest level in about two months on the Taiwan Stock Exchange.

TSMC rose nearly 3% at one point before ending the day at 259 Taiwan dollars ($8.34), up 1.97%. The shares were also at their highest levels in about two months on the New York Stock Exchange at nearly $44 in midday trading Friday.

After reporting a fourth straight quarterly slide in operating profit for the three months ended in June, TSMC forecast on Thursday an increase for the July-September term, citing an expected year-on-year revenue gain of up to 10%.

"We have passed the bottom of the cycle of our business and are beginning to see demand increase," CEO C.C. Wei said at an earnings briefing on Thursday.

The upbeat outlook by TSMC -- a barometer of global electronics demand thanks to its wide range of customers such as Apple, Huawei Technologies and Qualcomm -- sparked hopes that the semiconductor industry slump is coming to an end, sending shares of chipmaking equipment producers higher.

U.S. player Applied Materials climbed more than 4% Thursday, while Tokyo Electron gained a little more than 3% on the Japanese market Friday. The advances came after Dutch powerhouse ASML Holdings' April-June performance beat analyst estimates Thursday.

Wei declined to give specifics on TSMC's business with Huawei, which local suppliers had speculated was picking up now that the U.S. began to ease restrictions it placed on the Chinese telecom giant. The reprieve came after the summit meeting between U.S. President Donald Trump and Chinese President Xi Jinping in late June.

Meanwhile, some observers remained cautious.

"It just means excessive pessimism has subsided," an analyst in Taiwan who attended TSMC's earnings briefing said. Wei said the company was unable to read where the U.S.-China trade war was going, and that it did not know how the October-December would look like.

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