Hedge Fund Wiped Out! End of Bull Stampede? Taiwan Stocks Hold Key Support, Which Stocks Are Now at Sweet Prices?

The article titled 'Atypical Decline Hits! Bull Panic Selling! 3 Key Signals for Bottom-Fishing Entry' published on July 29 highlighted one key indicator for identifying a market bottom in Taiwan's stock market: whether the reduction in margin financing has caught up with the index correction. The statistics are as follows:

The Taiwan Weighted Index fell from its historical peak of 48,218.87 points on June 23, 2026, to an intraday low of 39,384 points on July 29, a decline of 8,834.87 points, representing a correction of 18.32%.

Changes in margin financing for the weighted index:

- Peak level: NT$631.345 billion on July 6 - Balance on July 30: NT$493.867 billion - Reduction: NT$137.478 billion - Reduction rate: 21.78%

The GreTai Market Index (TPEx) dropped from its historical high of 454.58 points on July 6 to an intraday low of 322.74 points on July 30, a total decline of 131.84 points, or 29.00%.

Changes in margin financing for the TPEx index:

- Peak level: NT$214.6 billion on July 6 - Balance on July 30: NT$163.014 billion - Reduction: NT$51.586 billion - Reduction rate: 24.04%

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From the perspective of the weighted index, the decline in margin financing has not only caught up with but even exceeded the index's correction, indicating that market positions are accelerating consolidation. Another sign of a market bottom is the appearance of long lower shadows or strong green candles indicating low-level share turnover. Last Friday's strong green candle helped the market hold the 200-day moving average, forming a solid support level.

The key reason Taiwan's market held the 200-day line was the Philadelphia Semiconductor Index (SOX) surging 8.19% on Thursday, July 30, maintaining its own 200-day support. This boosted global investor sentiment and prompted foreign institutional buying in Taiwan stocks. While the SOX rally was driven by strong earnings from Microsoft, Samsung, Lam Research, and ARM, the deeper reason lies in the market adage: 'The deeper the fall, the bigger the upside.' Previously, even strong earnings from TSMC and Alphabet failed to stop price declines, reflecting the inverse logic: 'The higher it goes, the bigger the downside risk.'

Leopold, known as the 'AI Stock God,' founded a hedge fund called Situational Awareness, which went long on AI infrastructure and hardware while shorting software companies. The fund used total return swaps (TRS) to amplify leverage to 4x. Its assets peaked at $45 billion in early July but were liquidated by last Thursday—wiped out in less than a month. South Korea's leveraged ETF assets have also plummeted from a high of $53 billion on June 22 to just $15–16 billion currently. This global deleveraging has been extremely thorough, helping market positions settle and paving the way for healthier future rallies.

Earlier articles had already tracked AI industry conditions through corporate earnings, clearly informing investors that fundamentals remain intact—deleveraging doesn't erase fundamentals. After this sharp market correction, a larger upward wave is likely. The 200-day moving average in Taiwan's market likely marks the bottom, but with the 100-day moving average still sloping downward, a sharp V-shaped recovery is unlikely. Instead, the market will likely expand and consolidate at the bottom before resuming its uptrend. Investors should focus on fundamentally strong stocks in semiconductors, AI components, ABF carriers, and other high-quality sectors. Key stocks include:

- AI Semiconductors: TSMC (2330-TW), ASE (3711-TW), MediaTek (2454-TW), Creative Electronic (3443-TW), Chung Sand (1560-TW), Yashine (6139-TW)

- AI Components: Molex-KY (3665-TW), Delta Electronics (2308-TW), Lite-On Technology (2301-TW), Chuan-Hu (2059-TW)

- PCB: Nanya PCB (8046-TW), Unimicron (3037-TW), Zhen Ding-KY (4958-TW), TPCB (2383-TW)

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Source: Moore Investment Consulting – Analyst Ye Junmin

The individual securities recommended or analyzed by our company have no improper financial interests. Past performance does not guarantee future profits. Investors should make independent judgments, conduct careful evaluations, and assume investment risks on their own.