Taiwan Stock Market Wind Indicator: After Epic Massacre, Futures Rebound — Holding 42,000 Key to Recovering 100-Day Moving Average

Taiwan stocks crashed 2,953.71 points last Friday, closing at 42,671.27, directly breaking through the support of the 100-day moving average. Yuanta Securities Investment Trust stated that TSMC's earnings call failed to meet high market expectations. This week, the index is expected to trade between 40,000 and 45,000 points. Meanwhile, Taiwan stock traders warn that the NTD's weakness, margin balances remaining at record highs, multiple U.S. tech giants reporting earnings, and Korea's ongoing deleveraging process are testing investors' patience amid high short-term volatility.

After the sharp sell-off in the spot market, Taiwan index futures in the night session rebounded, rising 877 points, up 2.06%. TSMC ADR fell 2.77%, UMC ADR dropped 4.67%, and ASE ADR declined 2.78%—all with smaller losses than their respective spot stocks—raising hopes for a rebound on Monday (20th). However, even though the futures rose to 43,481 points, they still haven't surpassed the 100-day moving average of the spot market at 43,525 points. The battle for the 100-day line will be the first hurdle for bulls to regain momentum.

From a positioning perspective, facing Taiwan's historic 2,953.71-point plunge, foreign investors recorded a record sell-off of NT$188.3 billion, while the three major institutional investors collectively sold a massive NT$263.146 billion. Margin balances dropped sharply by NT$27.613 billion in a single day, yet remain high at NT$587.963 billion, with the margin maintenance ratio falling to 170.53%. Under heavy selling pressure from institutions rapidly reducing positions, retail margin investors were heavily liquidated—especially in overbought sectors like passive components and optical communications, which saw declines of over 30%, even 40%, making margin positions the first to be washed out.

Foreign investors withdrew another NT$309.5 billion from Taiwan's centralized market last week, marking four consecutive weeks of net selling, totaling NT$945.4 billion in net outflows. This reflects the New Taiwan Dollar hitting new lows since April last year. Currently, foreign investors' net short futures positions have reached 86,189 contracts, a new historical high.

The stocks most heavily sold by foreign investors include Yuanta Taiwan 50 Upgraded (00403A-TW) with nearly 630,000 contracts, Yuanta Taiwan 50 (0050-TW) with 320,000 contracts, Yuanta Taiwan Growth (00981A-TW) with 240,000 contracts, AU Optronics (2409-TW) with 180,000 contracts, Nan Ya Plastics (1303-TW) and Yuanta Future 50 (00991A-TW) both exceeding 150,000 contracts, Pegasus ESG Investment Grade Bond 20+ (00937B-TW) with 120,000 contracts, Kaiji Taiwan TOP50 (009816-TW) with 77,000 contracts, Pegasus Taiwan Select High Dividend (00919-TW) with 67,000 contracts, and even TSMC (2330-TW) saw 66,000 contracts sold.

Technically, Taiwan's market broke through the psychological levels of 45,000, 44,000, and 43,000 in one fell swoop last Friday. After losing the 100-day moving average, the neckline level from the past two months sits at 42,006 points. If this level cannot be defended in the short term, the market may further test support near the May 20 low of around 40,000 points.

Last Friday, the U.S. PHLX Semiconductor Index closed down 1.63%, entering bear market territory, with chip stocks falling at least 20% from recent highs. With several U.S. tech giants reporting earnings this week, unless strong catalysts emerge, it may take more time for the market to stabilize and bottom out.

Yuanta Investment Trust analyzed that while TSMC's metrics and outlook remain strong, lower yields and higher depreciation during the initial phase of advanced process ramp-up, along with insufficient capacity at new fabs, have pressured profitability, failing to meet lofty market expectations, leading to the stock pullback.

Meanwhile, the South Korean market is undergoing a deleveraging process, awaiting financial market stabilization.

Entering U.S. earnings season, this week will see reports from Google, Tesla, Texas Instruments, IBM, Walmart, Intel, SAP, and STMicroelectronics. Amid current market volatility, these reports will serve as a key test of market resilience.

Overall, Yuanta Investment Trust believes the market's interpretation of TSMC's earnings call was conservative, but the expansion in capital expenditure signals continued optimism about the long-term outlook. With the market P/E ratio now low below 43,000 points, further panic selling is not advisable.