Fed effect drives Taiwan stocks to stay above 28K; major institutional investors actively布局, offsetting rate surges reveal internal risks

Taiwan stocks today, under the strong capital inflow of a total of NT$19.117 billion from the three major institutional investors, the weighted index surged by 322.89 points to 28,303.78, a gain of 1.15%, with trading volume expanding to NT$424.744 billion. Foreign investors led the net buy with NT$14.088 billion, investment trusts bought NT$1.029 billion, and proprietary traders bought NT$4 billion. The Federal Reserve’s December rate cut probability remains high at 96%, fueling continued speculation and prompting Asian funds to withdraw from tech stocks and shift toward financial and value stocks.

Strong foreign capital inflow momentum benefits Asian markets collectively

This week, foreign net inflows exceeded US$15 billion, making Taiwan stocks a focal point, with major Asian indices also rising. The Nikkei 225 rose 1.2% to close at 39,800 points, Korea’s KOSPI increased 0.8% to 2,650 points, China’s Shanghai Composite edged up 0.3% to 3,150 points, and India’s Nifty 50 gained 0.9% to 24,200 points. The US dollar index weakened to 102.5, further boosting emerging market attractiveness.

OECD forecasts that Asian capital inflows will reach US$50 billion in 2025, with India and Vietnam each attracting US$2 billion, benefiting from 6-7% GDP growth and global supply chain reconfiguration. Japan’s foreign investment share decreased to 40%, with capital focusing on banking stocks, which rose by 2.5%, highlighting a strategic shift toward undervalued financial products and avoiding high-tech valuation bubbles in US stocks.

Sector rotation accelerates, semiconductor and financial sectors drive dual engines

Within Taiwan stocks, sector rotation is clear. The semiconductor index surged 2.31%, with five stocks—Wanghong, Macronix, VSE, Siliconware, and Huadong—hitting the daily limit. Nanya Technology rose 6.86% to NT$163.5, benefiting from a 15% increase in DRAM and NAND chip prices and inventory replenishment demand. The glass sector performed well, up 4.22%, with Taiwan Glass up 4.8% to NT$38.2, and Fuhong Technology up 7.73%. The PCB sector continued its hot streak, with Unimicron up 4.8%, reflecting strong AI server orders.

Taiwan Semiconductor Manufacturing Company (TSMC), a heavyweight stock, rose 2.4% to NT$1,495, contributing over 200 points to the index. Hon Hai and MediaTek increased by 0.43% and 1.05%, respectively. The financial sector rose 0.28%, with Fubon Financial and Taishin Financial up over 2%, supported by the appreciation of the New Taiwan dollar to NT$31.25, reducing currency exchange costs for financial institutions.

Details of the three major institutional layouts: focus on heavyweight stocks and memory

This week, foreign investors accumulated NT$36.8 billion in net purchases, focusing on heavyweight and memory stocks, with TSMC buying 10,500 shares, Hon Hai 5,200 shares, and Nanya Technology 2,500 shares. Investment trusts shifted toward financial stocks for hedging, with Fubon Financial buying 3,801 shares, indicating a clear asset allocation shift. Proprietary traders actively bought into memory and PCB concepts, with Walsin and Unimicron purchasing 1,800 and 1,740 shares, respectively, reflecting internal institutional trading strategies.

Offloading ratio soars to 30-50%, 15 stocks flagged for risk

Despite the bullish atmosphere, the Taiwan Stock Exchange has identified 15 stocks to watch, including Nanya Technology, Walsin, Unimicron, Taiwan Glass, Powerchip, Wistron, Inventec, Innolux, Taishin Financial, WIT, Nanya Electronics, Evergreen Marine, covering sectors like semiconductors, PCB, panels, and transportation. These stocks have offloading ratios (the proportion of buy-sell reversals to trading volume) as high as 30-50%, indicating potential control by major players and short-term short-selling risks.

High offloading ratios imply volatile stock prices and liquidity risks, with retail investors facing significant chasing risks. Walsin hit the daily limit but had a 45% offloading ratio; Unimicron’s offloading rate exceeded 40%; Taiwan Glass’s offloading ratio reached 45%, all serving as risk warnings. These stocks often exhibit abnormal trading patterns, prone to regulatory intervention or margin call risks.

Year-end portfolio-building continues, 28,500 points within reach but risk management needed

PGIM Prudential analyst Liao Bing-kun pointed out that historical data shows that after a 2.15% decline in November, December’s average gain is 4-6%, with the traditional peak season effect evident. Taiwan’s market capitalization has surpassed NT$82.5 trillion, with trading volume expected to rebound to NT$4,500 billion. Fubon Investment Advisory Chairman Chen Yiguang believes this rotation is driven by Fed dovish expectations and year-end portfolio strategies. The RSI has risen to 68, indicating a somewhat bullish stance. Short-term support is around 28,000 points, with a test of resistance at 28,500 points.

Moore Investment Consulting analyst Hsieh Wen-en issued a warning that year-end portfolio adjustments often lead to retail chasing high, citing the historical example of the August 2024 Taiwan index futures limit-down event, which caused significant damage. Investors are advised to reduce holdings on rallies, focus on fundamentally stable financial and heavyweight stocks like Fubon Financial and TSMC, set stop-losses within 5%, and diversify holdings to cope with Fed meeting decision changes.

Close attention should be paid to tonight’s US data and the upcoming Federal Reserve meeting results. If core PCE inflation exceeds expectations, profit-taking may trigger a sell-off, with high offloading stocks facing downward pressure.