Margin Deleveraging Incomplete, Forced-Selling Pressure Remains
The Taiex today (5th) fell below the 42,000 mark, closing at 41,574.72, down 1,374.19 points or 3.20%, with foreign investors net selling NT$102.46 billion, the 10th-largest single-day net sell on record. Chen Yung-chun, General Manager of Fubon Investment Advisory, noted that since pulling back from its high, the Taiex has fallen about 17% based on intraday lows, but as of the previous day, margin balances had corrected by less than 11%, and are estimated to need to fall by another NT$50-60 billion, indicating the cleanup is not yet complete.
Chen said that after consecutive sharp declines, the margin balance level is the primary focus. If margins cannot be effectively reduced, subsequent settlement factors may still trigger heavy forced margin-call selling, which would suppress rebound momentum. Even if the market stabilizes in the short term, the rebound will be limited, and the pace of margin deleveraging will determine when the index stops falling and stabilizes.
Weak Global Linkage Makes Rebound More Difficult
Looking at global markets, this year has mainly been led by the U.S. Philadelphia Semiconductor Index, with high-tech stocks acting as the bullish locomotive. The PHLX Semiconductor Index has now pulled back to test its annual line, while the Korean stock market fell below its annual line as early as mid-October. In contrast, the Taiex, benefiting from the depth and breadth of its AI industry, had once charted its own course, but the Taiex annual line is at about 38,000 to 39,000 points, still some distance away, and with continued foreign selling and a stronger U.S. dollar in the near term, a rebound will be relatively difficult.
Looking to Q4, Chen expects the Taiex to trade in a 40,000 to 50,000 range. If the correction is gradual rather than a series of sharp drops, the annual line is expected to slowly rise toward 40,000, making 40,000 a relative low. Even if the index retests 40,000, a sharp rebound should not be expected; if Q4 can approach the previous high or touch 50,000, that would already be a solid performance. Recent gains have been concentrated in AI stocks, with many high-priced thousand-dollar and ten-thousand-dollar stocks seeing larger corrections, and the policy impact after the change in the U.S. midterm elections remains to be observed over the long term. However, chips are already in production at present, and supply-chain orders for next year are largely secure, with the market more concerned about demand in the year after. Q3 corporate earnings still grew 3 to 5 percentage points from Q2, and based on the day's market capitalization, the Taiex P/E ratio has fallen to 15 times, below the long-term average of 16 to 17 times, so there is no need to be overly pessimistic.