PHLX Plunge Drags Taiwan Index Futures Below Half-Year Moving Average
November opened with a super shock week for global financial markets, as the PHLX Semiconductor Index collapsed over 7% and Taiwan index futures broke below the half-year moving average, heading straight toward the 44,000 mark, raising market concerns that Taiwan stocks' fourth-quarter bull run could fail. Cathay Securities Investment Advisory analyst Guo Jingwei pointed out that the final week of October faced four variables, including the Federal Reserve standing pat, Big Tech earnings testing AI investment payback, heavyweight earnings calls in Taiwan stocks, as well as memory, electromechanical, and IC design bucking the downturn. The Fed's rate decision met expectations and the second-inflation alarm was temporarily lifted, but U.S. tech earnings showed the market no longer accepts visions for next year and the year after, focusing only on immediate cash flow. Fortunately, the four major cloud giants all posted positive operating cash flow from their core businesses, indicating their core cash-printing machines are intact and the AI theme remains online.
UMC Delta Electronics Earnings Misses Hide Value-Investing Signals
During Taiwan stocks' earnings-call week, UMC reported a third-quarter gross margin of 34% and sharply raised capital expenditure by US$3.2 billion, confirming a 10% price hike for mature-process capacity next year, but foreign investors, viewing the hike as weaker than expected, used the opportunity to trim holdings, leaving the share price unreflective of the positives. Institutional investors believe UMC, supported by dividend yield and specialty processes, offers a value-investing buying point near the NT$100 annual line. Delta Electronics posted third-quarter EPS of only NT$9.04 amid parts shortages, inventory write-down losses, customer build-out delays, and slower-than-expected high-voltage direct-current adoption, falling short of expectations and hitting limit-down after the earnings call. Chairman Cheng Ping said the above headwinds will pass and long-term growth momentum in AI power and liquid-cooling remains unchanged, with institutional investors viewing below NT$1,200 as a value-investing opportunity once foreign selling pressure clears and volume shrinks into a bottom.
Optics Advance as Copper Retreats, Easing Into Long-Term Gains for Transceivers
Another shock came from PHLX constituents, with IC design giant Marvell reportedly acquiring optical communications leader Lumentum, signaling that optics advancing and copper retreating is the major trend and setting up direct competition with Broadcom ahead. Institutional analysis sees optical communications and CPO as key battlegrounds for AI hardware, with Taiwan's optical communications industry poised to rise in long-term value. The U.S. will sequentially release October ISM Manufacturing PMI, midterm elections and Apple earnings, October ISM Services PMI and AMD and Super Micro earnings, ARM and Qualcomm earnings, October nonfarm payrolls and Lumentum earnings, while Taiwan stocks face earnings calls from Winbond, GlobalWafers, VIS and Phison, likely intensifying volatility.
High November Win Rate Puts Three Safe Havens in Lead Against Volatility
Looking at November strategy, Cathay Securities Investment Advisory said political uncertainty has been removed after the U.S. party rotation, and with the post-election and year-end window-dressing rally, November to December has historically been a relatively high-win-rate period for Taiwan stocks. Stock selection focuses on three criteria for resilient stocks: weekly gains against the market, favorable industry outlook with continued profit growth next year, and consolidated technicals with bottoms curling upward to lift moving averages. Qualifying safe havens are electromechanical/machine tools, memory, and IC design. Electromechanical is supported by a bottoming machine-tool cycle and AI humanoid-robot themes, with Hiwin and Syntec holding support; memory stocks Nanya Technology and Winbond both trade at P/E ratios below 5x and easily attract funds in choppy markets; IC design beneficiary Silergy gains from automotive and AI-server power-management IC growth, while Phison benefits from enterprise SSD and AI demand, with a chance to challenge prior highs once the market stabilizes.