Volatility Reflects Sentiment, Not Weaker Fundamentals
Affected by valuation corrections in U.S. technology stocks, uncertainty surrounding the U.S. midterm elections, and foreign investors trimming positions in Asian equities, Taiwan stocks moved in a volatile range on the 3rd. UOB Asset Management Quantitative Investment Department Head and UOB Superior Dividend Fill 30 (00918) manager Guo Xiucheng said recent market volatility mainly reflects short-term fund sentiment and valuation adjustments, not a clear weakening in corporate fundamentals.
AI Shifts Toward Earnings Realization as Supply-Chain Orders Stay Solid
Guo Xiucheng observed that the AI industry has gradually moved from theme-driven momentum to earnings realization. Although the market worries that continued expansion of AI capital spending by large technology companies could weigh on near-term free cash flow, order momentum across cloud service providers (CSP), ASIC, high-performance computing (HPC), data centers and related supply chains remains solid, and the long-term industry growth trend has not changed.
U.S. Bond Yields Ease From Highs as Apple Earnings Show Resilience
Internationally, U.S. technology stocks have recently faced profit-taking and valuation correction pressure, with the Philadelphia Semiconductor Index performing weakly and weighing on investment sentiment toward Asian technology stocks. On the other hand, the U.S. 10-year Treasury yield has retreated from its high, helping to ease valuation pressure on growth stocks; coupled with Apple’s latest earnings beating market expectations, global end demand still shows resilience and corporate earnings fundamentals show no systemic risk.
Funds Focus on Earnings Visibility as 00918 Combines Financials and AI Supply Chain
On fund allocation, Guo Xiucheng believes capital is not withdrawing from the technology sector broadly, but is concentrating in companies with earnings visibility, stable cash flow and stronger dividend capability. A number of foreign institutions have recently remained positive on AI servers, high-end PCB materials and ASIC design services, showing funds remain focused on leading companies in the AI supply chain with tangible benefits and competitive advantages. Taking UOB 00918 as an example, its holdings currently allocate about 40% to financial stocks as a stable source of income, while also including core AI supply-chain companies such as Wiwynn, Wistron, Quanta, ASUS, Gigabyte and Realtek, as well as Evergreen Marine, EVA Air, CTBC Financial Holding, E.SUN Financial Holding and Mega Financial Holding, representative companies combining earnings power and dividend-policy strengths, covering financials, AI servers, shipping and high-end electronics overall and balancing both dividend income and industry growth themes.
Shift to Earnings-Driven Market Gives High Dividend-Fill Stocks Defensive Edge
Guo Xiucheng said that as the market gradually shifts from valuation-driven to earnings-driven, corporate earnings power and cash-flow quality will become the focus for investors. In this environment, companies with high dividend yields, strong dividend-fill capability and solid fundamentals are expected to attract market capital more easily and show relatively resilient performance. Looking ahead, although global markets may still see volatility in the short term from political events and fund flows, Taiwan companies’ overall earnings base remains solid and the long-term AI development trend has not changed. In particular, as market sentiment settles, funds are expected to refocus on quality companies with industry competitiveness, stable dividend capability and growth potential, and short-term price swings caused by market sentiment can instead be viewed as an important opportunity to build positions in Taiwan’s quality high-dividend assets in stages.