Taiwan stocks swing violently and fall below 42000
Taiwan stocks continued volatile correction today (4th), swinging 1885.72 points intraday, once falling below the 42000 mark to an intraday low of 41855.82. Buying emerged after midday, and the market closed at 42948.91, down 358.63, with turnover expanding to NT$1兆1148.21億元.
40000 to 42000 seen as reasonable target zone
Taishin Investment Advisory strategist Huang Wen-ching noted that Taiwan stocks have pulled back more than 13% cumulatively from their historical high, and 40000 to 42000 should already be a reasonable correction target. Whether a substantial and strong rebound can follow will hinge on the pace of margin-credit deleveraging.
Huang Wen-ching analyzed that the recent consecutive sharp declines in Taiwan stocks mainly stem from insufficient market confidence and loose chip holdings. As of today, Taiwan stocks fell more than 16% from the intraday historical high of 49968 to today's low of 41855, and fell 13.79% on a closing-price basis. Unless margin positions have not been cut enough, if they have been reduced sufficiently, there is a chance to rebound.
Lagging margin reduction holds key to rebound
Looking at margin balances, Huang Wen-ching pointed out that Taiwan stocks fell 13.7% from the high to yesterday, but margin balances only declined about 8.3%, clearly lagging the market decline, showing insufficient margin deleveraging. Generally, margin positions are washed out at an accelerated pace during index bottoming, and today's margin reduction will also matter. If chips are cleaned up, the 40000 to 42000 range has a chance to rebound in震盪, while slow deleveraging may prolong the time spent震盪 bottoming in that range.
Low chance of National Stabilization Fund entry; buy AI heavyweights on dips
On whether the National Stabilization Fund will enter to support the market, Huang Wen-ching said the Fund has strict entry conditions, usually targeting major geopolitical or non-economic意外 events, as in the last US-Taiwan tariff war when Taiwan stocks collapsed in the short term with large declines. Although there is noise from elections and international geopolitics at present, it has not constituted a major disorder condition triggering the National Stabilization Fund. However, with county and mayoral elections approaching, state-owned banks and government funds are more likely at this stage to adjust and rotate positions on dips, especially when intraday volume expands and low-level turnover is active, with state-owned buying on dips helping stabilize market liquidity.
On operating strategy, Huang Wen-ching suggested that as the broad market pulls back to the reasonable target range of 40000 to 42000 in the short term, it instead provides a dip-buying opportunity, including quality AI heavyweights and supply-chain groups with long-term growth momentum, including foundry, advanced packaging, semiconductor equipment, thermal, servers and upstream ASIC core targets that have fallen sharply. In stock selection, pay close attention to individual companies' margin reduction, prioritizing stocks with clean chips and effectively exited margin balances, and avoid buying against the trend targets where margin balances keep rising instead of falling.