Taiwan Stocks Surge 98.16% in a Year, Ranking Third Globally

Taiwan's stock market experienced a volatile week, with the weighted index plummeting 4.1% or 1893.44 points. The market surged to a record high of 48,218 points mid-week before experiencing sharp declines for three consecutive days, closing at 44,571 points. This fluctuation, with a weekly swing of over 3,700 points, reflects a reasonable adjustment due to escalating external risks rather than a trend reversal, according to market analysts.

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The recent pullback reflects a reasonable adjustment due to rising external risks, not a trend reversal.

Over the past year, the Taiwan Weighted Index has surged an impressive 98.16%, positioning it as the third-best performing global market. South Korea's KOSPI led the gains with a 173.13% increase, followed by the Philadelphia Semiconductor Index at 138.27%. Japan's Nikkei 225 ranked fourth with a 75.22% rise.

Investment trusts analyze that the recent synchronized downturn in Asian markets, led by South Korea, was driven by technology stocks. However, the VIX fear index did not show a significant increase, suggesting market confidence remains intact. Easing Middle East geopolitical tensions have led to a drop in oil prices to $70 per barrel, with gold and Bitcoin also declining. Lower U.S. Treasury yields due to easing inflation pressures are seen as a stabilizing factor for the stock market in the medium term.

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The easing of Middle East geopolitical risks has led to a decline in oil prices, and inflation pressure has eased, causing U.S. Treasury yields to fall. This is a stabilizing cornerstone for the stock market in the medium term.

Looking ahead, analysts point to several key variables: the potential for a U.S.-Iran ceasefire, the recovery of oil transport through the Strait of Hormuz, product and industry trend announcements at Computex in early June, and the Federal Reserve's monetary policy under its new chair amidst rising inflation. Despite short-term volatility, with the index significantly diverging from its annual moving average and increasing margin financing balances, investment trusts recommend strategic buying in AI supply chains, optical communications, key components, semiconductor materials, and high-dividend stocks.

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The divergence between the weighted index and the annual moving average is historically large, and the stimulus from AI news has gradually become desensitized. Coupled with the significant increase in margin financing balances, the market sentiment is becoming chaotic. Therefore, short-term market volatility is expected to intensify, with individual stocks outperforming the broader market.