Facing negative news such as an extramarital affair scandal and national security concerns involving NVIDIA CEO Jensen Huang, the Taiex did not continue to bottom out but instead launched a strong rebound. After plunging over 12000 points in just one month, the index staged a dramatic comeback in the past two trading sessions, rebounding over 5000 points from last Friday's swing low of 37837.05 points. Financial writer Di Xiang wrote on Facebook that the rapid rebound was driven by a sharp decline in margin balances, which successfully achieved deleveraging, coupled with the National Stabilization Fund announcing its market-support entry, further boosting market confidence and easing panic selling.
Margin Balances Drop NT$42.356 Billion, Largest Single-Day Decline on Record
After this sharp selloff, Taiex margin balances once fell by 423.56億元, marking the largest single-day decline on record. Di Xiang said the panic was evident during the downturn, and after a major shakeout, leverage pressure was significantly reduced. He noted that investors who watch for such panic signals have a higher chance of identifying relative lows amid panic selling, avoiding selling low amid extreme pessimism, and improving their win rate in volatile markets.
National Stabilization Fund Enters at Precise Timing, Focus on Stabilizing Signal
In addition to major margin deleveraging, another important factor boosting market confidence was the National Stabilization Fund's announcement that it would enter the market to support prices. Di Xiang said the timing was indeed quite precise, usually coming when the impact of negative news peaks and liquidity risk is about to emerge. Such extreme market conditions tend to set the stage for a reversal, and the Fund's announced entry gave the market an extra push while helping prevent further expansion of liquidity risk. Regarding market concerns over whether the National Stabilization Fund has actually entered, and whether foreign investors' single-day net selling of nearly NT$100 billion could exhaust its funds in just days and overwhelm its buying power, Di Xiang said the Fund's price-support role does not rely simply on spending real money to buy stocks and single-handedly lift the Taiex. Its more important role is to send a stabilizing signal to the market and restore investor confidence. As long as market liquidity risk is contained and panic gradually subsides, stocks naturally become less prone to continued declines.
Sharp and Rapid Rebound as New Taiwan Dollar Nears 33
However, Di Xiang also warned that this rebound has been fast and sharp, and investors should not fall into FOMO, or fear of missing out, but should stay calm and carefully assess risks to improve their win rate in volatile markets. Also worth noting is that despite the strong rebound in the Taiex, the New Taiwan dollar exchange rate has continued to depreciate, approaching the 33 mark. Foreign exchange expert Li Qizhan reminded investors to closely monitor foreign-investor moves, particularly whether foreign investors will further trim holdings on the rebound or even expand net selling, as subsequent fund flows will continue to affect Taiex and foreign-exchange market performance.