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I. Market Structure and Technical Analysis

Index Performance: The Taiwan stock market opened lower but rallied during the session, rising as much as 664 points intraday and reclaiming the 10-day moving average. It closed up 266 points at 43,386, signaling a potential short-term bottom.

Trading Volume: Turnover reached approximately NT$846.1 billion, reflecting moderate and somewhat conservative sentiment, indicating cautious investor appetite for chasing gains.

Technical Positioning: The weighted index remains below the monthly moving average, suggesting a short-term rebound pattern. The OTC index rose for two consecutive days but still faces resistance from both the 10-day and monthly moving averages.

Range Outlook: The main market is expected to trade between 42K and 46K in August. Resistance lies at 45K–46K, while support at 40K–42K is gradually firming.

II. Five Key Drivers Supporting Market Stabilization

TSMC (2330-TW) Shows Strength: TSMC surged to limit-up, historically increasing the probability of further gains over the next 5–20 trading days to over 50%, boosting bullish confidence.

Deleveraging Completed:

- Korea’s market deleveraging ~90% complete - Taiwan’s margin debt declined from NT$631.3 billion to NT$493.8 billion - Positioning has clearly stabilized, supporting sustained rebounds

Strong Fundamental Support:

- Q2 earnings expected to hit record highs - GDP annual growth reached 13.72% - UBS raised full-year GDP forecast to 11%, the fastest pace since 1987

Short-covering Momentum Building: Foreign investors previously sold short NT$1.14 trillion, and proprietary traders significantly reduced positions, creating room for buybacks and short squeezes in August.

External Risks Fading:

- CSP earnings (Microsoft, Amazon) beat expectations - U.S. PCE and core PCE declined - Fed meeting concluded + electronics peak season approaching, improving risk appetite

III. Liquidity and Mid-Term Outlook

Supporting Forces: National team, institutional investors, ETFs, and capital returning through Asia funding centers provide downside protection.

Mid-Term Rhythm: August for consolidation and bottoming; September may challenge 48K–50K.

Key Variables: U.S.-Iran tensions, global elections, sustainability of AI capex.

IV. Industry Focus: AI Remains Core Investment Theme

Stock Selection Logic: Prioritize AI supply chain stocks with “corrected valuations + established long-term growth.”

Key Sectors:

- ASIC design, AI servers - PCB/CCL materials, ABF substrates - CPO silicon photonics, optical communications - Memory, passive components - Advanced packaging and testing equipment

Trading Strategy:

- Short-term rebound targets quarterly or neckline resistance - Strictly adhere to “buy low, don’t chase highs” and capital management

V. Key Industry Trends and Supply Chain Opportunities

Google TPU Surge:

- Demand projected to reach 15 million units by 2028 - Beneficiaries: TSMC (2nm), Creative (3443-TW), MediaTek (2454-TW), Foxconn (2317-TW), Wistron (6669-TW) - Advanced packaging capacity (CoWoS) remains supply-constrained

Spillover from Advanced Packaging:

- ASE Holding (3711-TW), Powertech (6239-TW), King Yuan Electronics (2449-TW) benefit - AI chips drive broad-based growth in packaging and testing demand

CPO Mass Production Begins:

- NVIDIA initiating integration, sharply increasing optical comms demand - Scale-up bandwidth needs are ten times scale-out

Optical Communication Material Bottleneck:

- Indium Phosphide (InP) supply will be a key constraint - Potential beneficiaries: United Monolithic (3081-TW), Sanechips (3363-TW), Powerwave (3163-TW), HC SemiTek (4979-TW), Opto (3234-TW)

Memory Structure Shift:

- DRAM prices structurally rising (even surpassing gold) - HBM crowding effect boosts DDR4/DDR5 and SSD demand

CCL Industry Upgrade:

- Tripod (2383-TW) becomes global market leader in share - High-end material demand strengthens competitiveness of Taiwanese firms (Tripod, Nan Ya Plastics (1303-TW), Laminates (6213-TW), TTM Technologies (6274-TW))

VI. Conclusion

Overall, the Taiwan stock market has shown triple turning signals: “technical bottoming + stabilized positioning + fundamental support.” While short-term resistance from the monthly line persists, the market is gradually recovering healthily, driven by unchanged long-term AI trends and capital inflows. Going forward, “stock selection over market timing” remains key—capturing AI-led trends and industrial upgrades with disciplined execution can steadily accumulate returns even amid volatility.

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Source: Chen Xuejin, Analyst, Luen Yuan Investment Advisory

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