US Inflation Surprise Drags Global Markets
US September CPI rose 3.7% year-on-year, above Wall Street expectations, seen as the main reason all four US indexes closed lower on October 14. The Dow Jones remained below its 60-day moving average, the S&P 500 and Nasdaq fell back below the 60-day moving average, and the Philadelphia Semiconductor Index fell 4.3% to below the 60-day moving average again. On October 15 Asian markets were dragged down, the Nikkei broke below its 60-day and 120-day moving averages, the Korea Composite gapped below its 240-day moving average to close at a nearly six-month low.
Record Foreign Sell-off Hits Taiwan Stocks
Since rebounding in August, the Weighted Index had outperformed major markets in level and strength, but still could not withstand a record single-day foreign sell-off of NT$302.5 billion, falling 3.41% to break below the 20-day moving average, with OTC selling of NT$20.5 billion and TAIFEX net short positions of 97,000 contracts hitting a record high. Short-term technicals are unfavorable to bulls, recall Buffett's maxim: rule one is never lose money, rule two is never forget rule one, using asset allocation and hedging to reduce impact, while the long term remains in a bull track.
TSMC Hits New High With Strong Outlook
TSMC reported third-quarter consolidated revenue of NT$1.494 trillion, up 17.6% QoQ and 50.9% YoY, with gross margin of 66.4% and operating margin of 58.7%, net profit of NT$763.06 billion, up 8% QoQ and 68.7% YoY, EPS of NT$29.43 and US ADR of US$4.6 per unit hitting a quarterly record, and first-three-quarters EPS of NT$78.75. 2nm, 3nm, 5nm and 7nm accounted for 8%, 33%, 28% and 10% of wafer sales, with 7nm and above totaling 79%. Fourth-quarter revenue is guided at US$52.3-54.3 billion, with the midpoint up 14% QoQ and 58% YoY, assuming an exchange rate of NT$31.8, gross margin of 65-67% and operating margin of 56.5-58.5%, with AI server processors contributing about 40%.
Capacity Expansion and Defensive Sectors Support Market
Chairman and President 魏哲家 said the company will expand aggressively to take all business and leave no opportunity to competitors, reiterating 2026 capex of US$60-64 billion, significantly above the past three years for 2026-2028, with 13 fabs in Taiwan and 5-6 overseas, N2 family capacity more than doubling YoY in 2027, A14 ready for volume in 2027 and mass production in 2028, three new 3nm fabs, overseas fabs diluting gross margin by about 2% this year and 3-4% in coming years, with Texas as one option requiring self-operation. Petrochemicals, telecom and financials became safe havens, Formosa Plastics four companies posted quarterly net profit of NT$76.279 billion, Nan Ya reported NT$38.83 billion in Q3 hitting a same-period record, the telecom trio and more than half of financial holding companies hit new highs, with 13 financial holdings earning NT$631.881 billion in the first nine months, surpassing full-year 2024. London Stock Exchange Group data estimates S&P 500 Q3 earnings up 31% YoY, with about two-thirds from technology and AI.