Margin Calls Hit Rock Bottom! Will an 8-Month 'Revenge Rally' Unfold?

Have you received calls from salespeople these days? Open your brokerage app, and you’ll see a sea of green. Just last month, everyone was proudly posting their profit statements and debating where to splurge on a feast. But within a month, some investors in Taiwan’s stock market are now facing margin calls, others have cut losses and exited, while some have simply deleted their trading apps—out of sight, out of mind.

'Extreme situations reverse themselves' isn’t mysticism—it’s a natural law of market cycles.

Many people ask me: 'If even the “national guardian mountain” TSMC (2330-TW) has broken below its quarterly moving average, why do you claim an August rebound is coming?' The answer is simple: four characters—'extremes reverse.' It’s like compressing a steel spring. When you push it to its absolute limit, the stored rebound force becomes the strongest. Right now, Taiwan’s stock market is approaching this 'snap-back' point across three dimensions:

**Valuation extreme**: Recently, AI概念股 skyrocketed, and everyone chased positive deviations. But after this '10,000-point-level' indiscriminate correction, many high-quality large-cap stocks have seen their valuations drop from sky-high levels to a 'ridiculously cheap' sweet spot.

**Positioning extreme**: For the past year, retail investors made money too easily, getting used to high leverage and margin trading—'four loans in one household'! The market was like a pressure cooker. These past three days of 'margin massacre' were brutal, but they’ve violently cleared out the floating, over-leveraged, unstable positions. With the shareholding structure cleaned up, major players can now move prices upward with less resistance.

**Indicator extreme**: Technically, both the main index and key large-cap stocks—such as TSMC (2330-TW), passive component leader Yageo (2327-TW), and substrate giant Nanya (8046-TW)—have seen their KD indicators drop into single digits (K values even below 5). This is a historically extreme oversold zone. In the past 20 years, such technical extremes have almost always been followed by fierce, revenge-driven rallies.

### The August rebound isn’t based on gut feeling—it’s backed by three key facts

Many ask: 'Are the conditions for a rebound really here?' The answer can’t rely on emotion—it must be data-driven.

1. **The most important market indicator: margin reduction is outpacing index decline**. In past major market bottoms in Taiwan, we’ve seen 'margin debt shrinking faster than stock prices'—a sign that the most unstable positions have already been flushed out.

2. **AI fundamentals remain rock-solid; short-term headwinds are long-term tailwinds**

Some are now claiming the AI bubble has burst, but the industry trend hasn’t changed—only the stock prices have become cheaper! Look at TSMC (2330-TW): its advanced process and CoWoS advanced packaging still enjoy a 'one-stop, supply-can’t-keep-up' monopoly. Its EPS in the second half will be even stronger than in the first. Even Quanta (2382-TW), which hit a trading halt yesterday, is actually sitting on a massive bullish catalyst. Quanta announced a GDR issuance to raise over NT$70 billion—why such a huge capital raise? Because AI server orders are exploding, requiring massive funds for materials and capacity expansion. The short-term dip due to share dilution concerns masks a long-term bullish signal: management’s extreme confidence in future orders.

3. **International chain reaction risks have eased**

One external trigger for this downturn was South Korea’s deleveraging pressure, which sparked foreign investor chain selling. But the latest news shows the South Korean government has stepped in forcefully, and the deleveraging process is largely complete. The foreign selloff pressure on Asian tech stocks will significantly weaken. For Taiwan’s market, this removes the biggest external hidden bomb.

### Conclusion: Remember the 80/20 rule

In the stock market, the 80/20 rule always holds. Successful investors turn others’ panic into their own opportunity. If you’re using idle cash and holding quality stocks like TSMC, Yageo, and Nanya, this is absolutely not the time to sell—it’s the time to bend down and pick up diamonds. Once market sentiment recovers, these stocks will likely stage consecutive strong rallies to protest their prior oversold conditions.

Two final warnings: First, avoid margin trading at all costs. This 'great escape' has already punished every leveraged investor. If you avoid margin, you’re already in an unbeatable position. Second, deploy capital in batches. Don’t try to time the bottom—gradually accumulate quality AI supply chain stocks. This is currently the most stable strategy.

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Source: Moore Investment Consulting – Analyst Jiang Guozhong

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