Foreign Investors' Record Short Bets Threaten Taiwan Stock Futures Settlement

Taiwan's stock market has surged for three consecutive days, adding 2,659.73 points and closing at 45,809.19, just shy of the 46,000-point milestone. This rally followed a dip below 42,000 points the previous Thursday, fueled by hopes of a peaceful resolution to the US-Iran conflict, which sent global markets soaring. However, a stark contrast exists in the futures market, where foreign investors, despite three days of net buying in the spot market, are aggressively holding onto their short positions. They added another 3,113 futures contracts to their short positions on Monday, bringing their total net short to a record 69,847 contracts. This massive short position, coupled with pre-holiday selling pressure ahead of the Dragon Boat Festival, suggests a potentially volatile trading day on Tuesday, coinciding with the index futures settlement. Analysts note a divergence between price and volume, with trading volumes remaining below the monthly average during the recent rebound, indicating a lack of investor confidence. The week is packed with significant events, including super central bank week, the index futures settlement, the US quadruple witching, and the Dragon Boat Festival holiday. Observers are watching for shifts in market sentiment and potential profit-taking. While some analysts see strong support at the 20-day moving average, they caution that without increased trading volume to match the monthly average, challenging the historical high of 46,552 set in early June will be difficult.

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foreign investors, though buying spot for three consecutive days, refuse to give up their futures short positions.