U.S. Election Triggers AI Regulation Worries, Taiwan Stocks Face Historic Selling Pressure
Results of the U.S. midterm elections are out, with the Democratic Party making gains in several key states. The market worries that AI regulatory policy may tighten, hitting U.S. AI data center buildouts and tech stock valuations, with U.S. tech stocks and the Philadelphia Semiconductor Index plunging. Taiwan stocks faced selling pressure on the 6th, with the benchmark index plunging 3737.67 points intraday, down 8.99%, the largest intraday point drop in history, falling to a low of 37837 points and closing at 39701 points, down about 4.5%, losing the 40000-point mark, with turnover expanding to 1.24 trillion yuan. From the early-October high of 49968 points, the low represents a pullback of 12131 points, a swing decline of 24.27%.
Zhang Yicheng Names Three Stabilization Indicators
Analyst Zhang Yicheng believes that when extreme panic appears and investors rush to sell, it is often when a swing low is gradually forming, and investors should not blindly follow the panic, but watch for bottoming signals and positioning opportunities. The three indicators include whether margin balances fall below 5230 hundred million yuan, after forced liquidation selling pressure is fully released; the benchmark index's negative divergence from its quarterly moving average has widened to about -18%, showing a clear short-term oversold condition; and when the New Taiwan dollar stops depreciating and turns stronger, helping restore confidence and drive foreign investors from selling to buying. Although a large number of stocks hit limit-down in early trading today, the number of limit-down stocks narrowed intraday, with bargain-hunting funds emerging at lows, plus expectations that the National Stabilization Fund may enter the market, suggesting the most panicked phase may be nearing its end.
B-Wave Rebound Eyes 42470 First, Then Challenges 47000
Analyst Lin Hanwei notes that when Taiwan stocks plunged on July 29, margin balances fell sharply, followed by an index rebound over the next 5 trading days and 20 trading days. If the margin reduction this time exceeds the broader market decline, it will help foster an oversold rebound. Ahead, track whether heavy bargain-hunting volume after breaking below the annual moving average can hold the low, whether the margin reduction exceeds the market decline, and whether TSMC and U.S. tech leaders can stabilize together. Using wave structure analysis, he views the plunge from 49968 points to 37837 points as Wave A correction, which has a chance to come to a temporary end. If buying support strengthens, a Wave B rebound could unfold, but a Wave C pullback must still be watched, and it should not be seen as a return of the long-term bull market.
The initial rebound target is 42470 points, with a stronger move challenging around 43900 points, and further watching whether 45000 points can be reclaimed. If the quarterly moving average around 47000 points is retaken, the bullish structure could recover, with a possible challenge of the historical high again by year-end. Focus in November is on value restoration in quality industry leaders, looking among orders, earnings, and P/E valuations for wrongly sold companies to position in batches, as well as rotation in solar and software groups, with green energy, software, and robotics groups still seeing individual stocks bucking the trend to hit limit-up, showing funds are seeking thematic directions.