Taiwanese traders are increasing their leveraged bets on the stock market to levels not seen in 17 years, with margin debt reaching NT$351 billion ($11.1 billion) as of Monday. This surge in leveraged trading underscores a strong risk appetite among investors, even as the benchmark Taiex Index experiences significant swings. The Taiex, despite reaching record highs, has seen considerable volatility, including a more than 1,000-point swing in a single day.
The AI frenzy is a primary driver behind this increased leverage, making Taiwan a capital for leveraged stock bets. However, major semiconductor stocks like TSMC, which accounts for over 40% of the total market value, have shown signs of consolidation. TSMC closed down 2.11% at NT$2,320.00 on Tuesday and fell 2.27% to NT$2,370.00 on Monday, even after hitting a 10% increase limit on Friday. This consolidation in TSMC led to a 1.37% fall in the semiconductor subindex, with other key tech players like MediaTek Inc. and ASE Technology Holding Co. also experiencing declines.
Despite the consolidation in large-cap semiconductor stocks, funds are rotating into other AI-related stocks, indicating active rotational buying. Foreign institutional investors have been net sellers, offloading NT$19.19 billion on Monday and NT$5.73 billion on Tuesday. Analysts suggest TSMC's consolidation is technical, with fundamentals remaining sound, and expect the stock to trade between NT$2,200 and NT$2,500. The movement of the Taiwan dollar against the U.S. dollar is also being closely watched as a barometer for foreign investment flows and the Taiex's direction. Meanwhile, memory chip suppliers Nanya Technology Corp. and Winbond Electronics Corp. bucked the downturn, soaring 10% due to a global supply shortage.
Taiwan's stock market is influenced by a new day-trading alert system, implemented in August 2021, which has been shown to generate short-term price pressure and curb speculative activity. This effect is particularly strong for large-cap stocks and those with high margin-buying ratios, indicating that the alerts are an effective market signal for retail investors. The benchmark Taiex index recently ended up 0.62% at 43,386.41 with turnover totaling NT$844.53 billion ($26.16 billion) on Monday, boosted by eased AI concerns after strong earnings from companies like Amazon, which posted its largest quarterly revenue growth in over four years.
