July Fund Market Volatility! Tech Stocks Retreat on AI Capital Spending Concerns as Money Flows into Bond Funds, Defying Trend

Global markets plunged into significant volatility in July, primarily driven by renewed U.S.-Iran tensions that temporarily pushed up oil prices, the U.S. dollar, and U.S. Treasury yields. This heightened uncertainty around inflation and monetary policy, keeping investor sentiment cautious. Short-term overbought semiconductor stocks pulled back due to rising skepticism over the return on massive AI-related capital expenditures, dragging down tech and Taiwan equities. In contrast, natural resources benefiting from higher energy prices and Latin American markets with commodity exposure delivered relatively strong performance.

In terms of overseas fund performance, the depreciation of the New Taiwan dollar against the U.S. dollar added foreign exchange gains to returns when converting back to local currency. A total of 954 offshore funds approved by Taiwan’s Financial Supervisory Commission’s Securities and Futures Bureau declined an average of 0.50% in July. Among them, 619 equity funds fell 1.11% on average, 57 balanced funds dropped 0.37%, while 257 bond funds逆势 rose 0.72% on average.

Franklin Securities Investment Advisory noted that amid recurring Middle East tensions, deleveraging in semiconductor stocks, and concerns over AI development, global equities have retreated from June highs, with volatility intensifying after July earnings reports. The firm advises conservative, steady investors to move beyond the traditional mindset of bonds as the sole source of income and instead adopt U.S. balanced funds as a core holding to expand return opportunities.

Among major regional equity funds, Eastern European and Latin American funds rose 4.05% and 3.18% respectively in July, ranking first and second among major regions. This outperformance was supported by energy and commodity themes, with relatively low exposure to tech stocks.

In contrast, Asian markets faced heavier corrections. South Korea's semiconductor stocks faced heavy selling pressure, dragging down Asia ex-Japan and emerging market equity funds. Taiwan equities were also affected by the broader AI-related selloff. However, experts expect emerging markets’ long-term growth momentum to remain intact, supported by AI, digitalization, energy demand, and industrial upgrading.

In sector and bond funds, global real estate funds rose 5.36% in July, leading all major sector funds. Natural resources funds also gained 5.15% on rising oil prices. In contrast, technology funds sharply corrected by 11.18% amid market reassessment of massive AI capital spending and return concerns, finishing at the bottom. However, fund managers believe corporate IT investment and cloud service demand remain strong, and the AI investment trend remains sustainable.

In the bond market, rising U.S. Treasury yields pressured various bond markets. U.S. dollar short-term money market funds rose 1.90%, delivering the best performance. Asian local currency bond funds and non-investment grade bond funds with shorter durations also demonstrated relative resilience against market declines.