Fed Rate Cut Expectations Boost Market, Taiwan Stocks Break 28K with Active Participation from the Three Major Institutional Investors

Today, Taiwan stocks, with the concerted effort of foreign investors, trust funds, and proprietary traders, broke through and stabilized above the 28,000-point mark. The three major institutional investors bought a total of NT$19.117 billion net today, hitting a recent high, led by foreign investors who alone bought NT$14.088 billion net, while trust funds and proprietary traders bought NT$1.029 billion and NT$4 billion respectively. The weighted index rose by 322.89 points, closing at 28,303.78 points, up 1.15%, with trading volume expanding to NT$424.744 billion, indicating a clear increase in bullish market sentiment.

**Fed Rate Cut Probability Nears 100%, Asian Funds Flow In Large Volumes**

The surge in buying is driven by the high probability (about 96%) of a rate cut by the Federal Reserve in December. Institutional investors expect the year-end accounting rally in Taiwan stocks to continue, with a target of 28,500 points possibly within reach. Meanwhile, regional Asian markets generally rose today: Nikkei 225 up 1.2% to 39,800, KOSPI up 0.8% to 2,650, Shanghai Composite up 0.3% to 3,150, and India’s Nifty 50 up 0.9% to 24,200, showing regional linkage.

The US dollar index weakened to 102.5, and foreign net inflows into Asian equities this week exceeded US$15 billion. Notably, foreign capital is experiencing rotation, gradually withdrawing from high-valuation US tech stocks and shifting toward Asian financial and value stocks. India and Vietnam attracted about US$2 billion each, while Japanese bank stocks rose 2.5%. Low-valuation financial groups (with dividend yields over 5%) have become new allocation focuses, highlighting international capital’s strategic move away from the US tech bubble.

**Internal Sector Rotation Accelerates, Semiconductors, PCB, and Financials Rise Together**

Benefiting from capital rotation, Taiwan stocks show sector differentiation. The semiconductor index surged 2.31%, with five stocks hitting daily limit-ups: Macron, Winbond, VSE, Silicon Motion, and Huadong. Nanya Technology rose 6.86% to NT$163.5, driven by about 15% increases in DRAM and NAND chip prices and strong inventory replenishment demand. Glass stocks also performed well, rising 4.22%, with Taiwan Glass up 4.8% to NT$38.2 and Fuh Hwa Tech up 7.73%. The PCB sector remains hot, with Unimicron up 4.8%, benefiting from full orders for AI servers and a global electronics supply chain recovery.

In terms of blue-chip stocks, TSMC rose 2.4% to NT$1,495 (up NT$35), contributing over 200 points to the index. Hon Hai and MediaTek increased 0.43% and 1.05%, respectively. Financial stocks gained 0.28%, with Fubon Financial and Taishin Financial both rising over 2%, supported by the NT dollar appreciating to NT$31.25, reducing currency exchange costs. Among the three major institutional investors, foreign investors focused on TSMC (net buy of 10,500 shares), Hon Hai (net buy of 5,200 shares), and Nanya Technology (net buy of 2,500 shares). Trust funds shifted toward financial stocks like Fubon Financial (net buy of 3,801 shares), while proprietary traders increased holdings in Winbond (net buy of 1,800 shares) and Silicon Motion (net buy of 1,740 shares).

**Overheating Warning Emerges, 15 Stocks Signal Red Flags**

Despite the bullish atmosphere, the Taiwan Stock Exchange has identified 15 stocks to watch, including Nanya Technology, Winbond, Silicon Motion, Taiwan Glass, and others, mostly semiconductor, PCB, and financial concept stocks. These stocks have experienced excessive gains and abnormal trading volumes, with a high buy-sell ratio of 30-50%, indicating potential manipulation and short-term shorting risks.

Moore Investment Consulting analyst Hsieh Wen-en warns that year-end profit-taking may tempt retail investors to chase high prices, and risks similar to the August 2024 Taiwan index futures limit-down event should not be underestimated. Investors are advised to reduce holdings on rallies, shift toward fundamentally solid financial and blue-chip stocks like Fubon Financial and TSMC, set stop-losses within 5%, and diversify holdings to reduce volatility risk. Fubon Securities Chairman Chen Yiguang pointed out that the Taiwan stock RSI has risen to 68, indicating a somewhat overbought condition, with support at 28,000 points and resistance at 28,500 points.

Overall, the stabilization above 28K reflects not only the liquidity effects driven by the Fed’s dovish expectations but also Taiwan’s strategic position in the global financial rotation within Asia. However, signs of internal overheating serve as a reminder for investors to balance optimism with caution, closely monitor upcoming Fed meetings and US economic data, and position themselves prudently for the year-end rally.