Taiwan Stocks Plunge, But Analysts See Signs of Stabilization Amidst Panic Selling

Taiwan's stock market opened sharply lower on June 8, with the Taiex index shedding approximately 2700 points. KGI Securities attributed the decline to a technical correction following a significant rally, not a fundamental downturn. The market's drop was triggered by stronger-than-expected US employment figures, fueling concerns that the Federal Reserve might adopt a tighter monetary policy. This has particularly impacted AI-related stocks, which have seen high valuations.

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This wave of correction in the Taiwan stock market was mainly triggered by the better-than-expected US employment report in May, which led to market concerns about the Fed potentially shifting to a tighter policy, thereby suppressing the performance of high-valuation AI-related sectors.

KGI Securities noted that market volatility will remain closely tied to the Federal Reserve's policy direction, especially concerning inflation data and interest rate decisions. Any data suggesting an interest rate hike or a delay in rate cuts could exacerbate market fluctuations. Key events to watch include the release of May CPI data on June 10 and the FOMC meeting on June 18-19, chaired by the new governor.

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The fundamental outlook for AI has not shown any substantial signs of weakening. Whether it's the scale of capital expenditure by cloud service providers, the order visibility of AI servers, or the demand for advanced semiconductor processes and high-end packaging, all continue to maintain a strong expansion trajectory.

Despite short-term volatility, KGI Securities emphasized that the fundamental outlook for AI remains robust. Capital expenditure by cloud service providers, order visibility for AI servers, and demand for advanced semiconductor processes and high-end packaging continue on a strong expansion trajectory. The firm believes the current correction is an adjustment of chips and sentiment, not a structural reversal. With the long-term AI trend intact, KGI Securities predicts the market will return to its upward path after this period of consolidation.

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Therefore, the current correction can be interpreted as an adjustment of chips and sentiment. Under the premise that the long-term AI trend remains unchanged, KGI Securities believes this correction does not alter the medium-term bullish pattern, and the market is expected to return to its original upward trend after oscillating and consolidating.