KGI Investment Trust Forecasts Upward Earnings Revisions Amid High-Volatility Market Rally

Following a historic market plunge the previous day, Taiwan's stock market surged over 1,600 points intraday on the 21st. KGI Investment Trust noted that as corporate earnings season unfolds, sustained growth in AI demand continues to drive upside potential for corporate profits. However, in the short term, a clear one-way market trend is unlikely. The firm expects Taiwan's stock market to trade in a high-range consolidation pattern over the next month, with bullish and bearish forces offsetting each other.

KGI Investment Trust emphasized that uncertainty remains around global inflation and interest rate trajectories, leading markets to oscillate between fundamental positives and valuation pressures. With both forces in balance, the outlook for Taiwan's equities over the next month points to high-level range-bound volatility. Investors are advised to consider trimming positions as the index approaches prior highs.

The firm further explained that TSMC's recent upward revision of its revenue forecast and capital expenditure outlook during its July earnings call could reignite a positive cycle, prompting further earnings upgrades across its supply chain and supporting overall profit expectations for the Taiwan market.

However, fluctuating inflation expectations have kept U.S. Treasury yields volatile, affecting funding costs and investor risk appetite. The interplay between earnings upgrades and valuation corrections makes it difficult for the market to establish a definitive short-term trend.

KGI's research report incorporates insights from Fundstrat, a well-known independent Wall Street research firm. The latest market consensus estimates show 2027 expected EPS revised upward from $352 to $399—an increase of 13.3%. As earnings growth has outpaced stock price appreciation, the forward P/E ratio for the S&P 500 has actually declined from年初 levels, indicating solid fundamental support in the market.

From a positioning perspective, monthly installment investments by Taiwanese investors into Taiwan equity ETFs have surged from approximately NT$10 billion a year ago to over NT$20 billion currently. When lump-sum purchases are included, the inflow of new capital is even more substantial. Despite tug-of-war dynamics between domestic and foreign investors, this sustained capital inflow has helped Taiwan stocks remain relatively resilient in recent years.

KGI Investment Trust stressed that market focus is gradually shifting from 'investment scale' to 'profitability.' Supply chains in advanced process technologies, ASICs, high-speed transmission, and thermal solutions continue to report strong order visibility, indicating no weakening in industry fundamentals. The market also anticipates that the accelerated commercialization of new applications such as AI Agents will serve as a key catalyst for the next phase of growth.