- On Monday, the Taiwan Weighted Index (TWSE: TAIEX) closed up 0.42% at 36,958.8 points. Bolstered by the overall strength of Asian stock markets, the index surged over 1.4% during the day, reaching a record high of 37,344.5 points. The preliminary market transaction value was 919.977 billion TWD, slightly lower than the 985.525 billion TWD revised from the previous trading day.
- Taiwan Semiconductor Manufacturing Co. (TSMC, 2330:TW) faced significant selling pressure at the end of the day, with its stock price turning from gains to losses, ultimately closing down 0.25%. The stock’s late-day decline of 15 TWD directly led to a noticeable narrowing of the overall market gains, reflecting a tendency for profit-taking after favorable expectations were realized.
- The external macroeconomic environment is experiencing high volatility, as the United States and Iran accuse each other of violating a ceasefire agreement, leading to the closure of the Strait of Hormuz. Following a decline of over 9% last Friday, international oil prices rebounded by more than 7% in the current trading day, with geopolitical risk premiums rising again.
Weighted Stock Performance and Market Liquidity Divergence
During the trading day, Taiwan's stock market exhibited significant internal structural divergence. Although the benchmark index hit a historical high during the day, there was a distinct deviation in the movement between large-cap weighted stocks and small to mid-cap stocks. TSMC's recent investor meeting delivered operating prospects that met market expectations, further affirming strong demand for artificial intelligence (AI). However, because the positive expectations for the stock had been fully priced in before, the lack of surprising marginal information post-meeting led to institutional funds concentrating profits at the end of the day. Unlike the pressure on large-cap stocks, trading activity increased significantly in the over-the-counter (OTC) market concentrated on small to mid-cap stocks. Yuanfu Securities analysts' data show that domestic capital's involvement gave the OTC index greater resilience, with individual stocks in several sub-sectors hitting their limit, indicating that market liquidity is spreading from single-weighted stocks to various vertical fields of the AI supply chain.
Overview of Earnings Ahead of Tech Giants' Reports
Global capital markets are entering a critical earnings verification period, with U.S. markets facing a super earnings week for tech giants. Key companies such as Texas Instruments (TXN:US), Tesla (TSLA:US), Alphabet (GOOGL:US), and Intel (INTC:US) will release financial data first, followed by Meta Platforms (META:US), Microsoft (MSFT:US), Qualcomm (QCOM:US), and Apple (AAPL:US) next week. The earnings of these companies, at the pinnacle of the global tech supply chain, not only test their valuations but also provide forward guidance on future order visibility for Taiwan's electronic contract manufacturing and semiconductor supply chain. Should these tech giants offer capital expenditure plans and earnings forecasts that exceed expectations, it would inject sustained bullish confidence into Taiwan-related AI hardware assembly, heat dissipation modules, and advanced packaging sectors. The current market consolidation is partly due to technical watchfulness ahead of the release of these critical data points.
Reassessment of Risk Premiums Due to Geopolitical Factors
Amid ongoing turbulence in the Middle East geopolitical landscape, price volatility in the commodity markets is transmitting to the equity markets. Escalating tensions between the United States and Iran have led to the closure of the Strait of Hormuz, causing a single-day rebound of over 7% in international oil prices. For Taiwan, heavily reliant on energy imports, the sharp swings in oil prices increase input costs for manufacturing and may disrupt the path of global inflation decline. Although the three major U.S. stock indices hit new closing highs last Friday, suggesting a temporary desensitization to geopolitical risks in the U.S. domestic market, concerns about potential supply chain disruptions due to geopolitical conflicts are recalibrating risk premiums in emerging Asian markets. If substantial progress can be made in U.S.-Iran negotiations, reducing volatility in the energy markets will help stabilize regional market risk appetites.
Technical Landscape and Range Debate of the Index
Combining internal capital dynamics and external macro variables, the Taiwan Weighted Index is currently operating in a consolidating pattern. The structural bullish market logic driven by AI computational power demand has not fundamentally changed, as evidenced by the view of Yuanshan Value Momentum 50 ETF manager, indicating that mid-to-long-term growth trends remain stable. However, as the index approaches the 37,000-point mark, the battle between bulls and bears has intensified significantly. Analysts generally expect that before core U.S. earnings reports emerge and the Middle East situation becomes clear, the Taiwan stock market’s short-term trading range will primarily focus between 36,800 points and 37,300 points. Within this range, capital may engage in frequent tactical rotation between semiconductor equipment, server components, and traditional defensive sectors.
In Monday's trading, Taiwan’s capital market demonstrated a complex pricing process concerning global industrial cycles and geopolitical variables. The Taiwan Weighted Index, after refreshing its historical high to 37,344.5 points in the early session, saw gains gradually convergence due to weakened valuation momentum of core-weighted stocks, ultimately closing at 36,958.8 points. This trend reflects the current vulnerability of the semiconductor sector, highly valued, in facing the materialization of earnings expectations. Nevertheless, driven by the long-term dividends of AI computational infrastructure construction, Taiwan's industrial position as a global advanced manufacturing hub remains stable, with market funds seeking new alpha returns along the industry's upstream and downstream.
Transmission Along the Industrial Chain
TSMC’s (2330:TW) operational outlook forms a key variable for the entire Asian tech hardware supply chain. Although the stock fell 0.25% at the close, its optimistic endorsement of AI chip demand during the investor meeting quickly transmitted along the industrial chain. The tight state of advanced packaging (CoWoS) capacity directly boosted expectations for local semiconductor equipment suppliers and material testing companies. At the same time, the iterative upgrade of computational chips requires higher-spec energy solutions and increased layers of printed circuit boards (PCBs), resulting in substantial capital inflows into the server-related sub-supply chain system. Domestic capital’s active positioning in the OTC market is based on this downstream component transmission logic from upstream wafer foundry. If global cloud service providers (CSPs) continue to expand capital expenditures, this industrial chain transmission effect will materialize in corporate revenues over the coming quarters.
Valuation Reassessment After the Investor Meeting
The capital market’s reaction to "all positives priced in" was vividly demonstrated in the weighted stock’s market movement. Before the conference, the market had aggressively pre-priced the semiconductor cycle recovery and additional AI-driven profits, driving share prices up significantly. Consequently, when the company's management provided forward guidance that met but did not significantly exceed the most optimistic buy-side expectations, some institutions pursuing absolute returns chose to take profits near historical highs, which directly resulted in the 15 TWD drop at the end of the day. This valuation reassessment does not indicate a deterioration of the fundamentals but is a normal technical correction as asset prices regress to the mean of fundamentals after rapid beta expansion.
Structural Mismatch Between Traditional Tech Demand and AI Computational Power
While the AI supply chain is flourishing, the market must also acknowledge the recovery slope of traditional consumer electronics and automotive semiconductor demand. The soon-to-be-released financial reports of Texas Instruments (TXN:US) and Tesla (TSLA:US) will provide critical microdata on industrial and automotive end demand. Currently, Taiwan’s electronics industry faces a notable structural mismatch: on one hand is the full slate of AI server and high-performance computing (HPC) orders, and on the other hand is the moderate and gradual recovery of terminal demand for personal computers (PCs) and smartphones. If the unwinding speed of traditional domains' inventories falls short of expectations, it might impact the gross margins of some comprehensive foundries spanning multiple application fields. Therefore, the upcoming performance of U.S. tech giants’ reports will be crucial for the market to assess whether this demand divergence can be marginally reduced.
Geopolitical Disturbances and Implicit Constraints on Operating Costs
While the industrial chain is operating at high speed, geopolitical unrest in the Middle East serves as an unignorable macro backdrop. The closure of the Strait of Hormuz led to a sharp rebound in international oil prices, exceeding 7%, implying potential upward pressure on sea freight logistics costs and industrial electricity costs for Taiwan’s vast electronics manufacturing industry. If energy prices remain abnormally high for an extended period, it will not only erode the net profit margins of mid to downstream foundry companies but may also push up global core inflation, forcing Western central banks to maintain tight monetary policies, thereby suppressing consumer market purchasing power. Therefore, substantial progress in U.S.-Iran negotiations is not only related to global macroeconomic stability but also directly impacts the boundary conditions of the long-term profitability model of Taiwan’s electronics supply chain as a core geopolitical variable.
