Ne Zha Market Momentum: Follow Largan, Lite-On, Nippon Electric, Yageo, Walsin — Don’t Miss Out

I. Market Structure: Sharp Sell-off Followed by Recovery, Monthly Support Holds Temporarily

Today, the Taiwan stock market exhibited a 'gap down, sharp sell-off, then recovery amid volatility' pattern. The index plunged nearly 1,000 points intraday, hitting a low of 44,308, before closing down 589 points at 44,719. Trading volume shrank to approximately NT$850.2 billion.

The GreTai Price Index also declined by 6.04 points, closing at 384.79, with trading volume around NT$179.3 billion. Both major indices found support after retesting their monthly moving averages.

Today’s turnover was significantly lower than recent peak levels, indicating the move was more driven by panic-driven adjustments and short-term profit-taking rather than a full-blown market collapse.

II. External Risks: Oil Prices and U.S. Treasury Yields Pose Short-Term Pressure

Geopolitical tensions in the Middle East remain unresolved, with shipping disruptions in the Strait of Hormuz. Brent crude oil prices have surged back near $90 per barrel, reigniting market concerns over energy-driven inflation.

U.S. long-term government bond yields have also spiked sharply. The 30-year yield briefly exceeded 5.33%, the highest since 2007, while the 10-year yield approached 4.75%. Financial conditions have clearly tightened.

Higher yields increase corporate financing costs and compress valuations for high P/E technology stocks. Therefore, investors must closely monitor three key variables: oil prices, U.S. Treasuries, and geopolitical developments.

III. Fundamentals: Taiwan’s Core Strength Lies in the AI Supply Chain

Despite an unfavorable external environment, Taiwan’s domestic fundamentals have not deteriorated. On the contrary, corporate earnings outlooks continue to improve, driven by strong demand for AI servers, advanced semiconductor processes, and data centers.

AI investment is gradually shifting from generative AI to the 'Agentic AI / Agent-Based AI' phase. Demand for computing power, memory, networking, thermal solutions, power supplies, and high-speed transmission remains structurally robust.

Therefore, this pullback should be interpreted as a period of consolidation and share rotation at elevated levels, not yet a reversal of the AI bull market.

IV. Capital and Industry Trends: Amid Index Volatility, Funds May Shift Toward Mid-Cap Stocks

With overall market volume gradually shrinking and difficulty breaking past previous highs in the short term, the market is likely to enter a 'time-over-price' consolidation phase.

Capital focus may rotate from large-cap blue chips toward mid- and small-cap tech stocks with solid earnings growth, reinforcing the idea that 'stock selection matters more than market timing'.

Entering Q3, the traditional electronics peak season, combined with the rollout of new AI servers, next-gen GPU platforms, and consumer electronics, sectors such as PCBs, CCL, CPO, thermal management, connectors, power supplies, memory, passive components, and server assembly remain worth tracking.

V. Forward-Looking Strategy: Fundamental Stock Selection Over Thematic Chasing

The core principle for short-term trading remains: 'Buy the dip, don’t chase rallies; pick strong stocks amid volatility'.

Stock selection should use a dual filter: 'Q2 earnings reports + July revenue data'. Prioritize companies with growing profits, stable gross margins, record-high revenues, and strong order visibility.

For stocks with excessively high P/E ratios, declining margins, stagnant revenue, or those purely reliant on speculative themes, consider reducing positions during rebounds.

The monthly moving average around 44,000 points is the first key support level. If it holds, the short-term structure remains a bullish consolidation. A return above 45,000 points with rising volume would favor another attempt to challenge previous highs.

Overall strategy should follow the 'first squat, then jump' mindset. The best opportunities aren’t the hardest-falling stocks, but fundamentally improving, resilient stocks that show accumulation during broad market selloffs.

VI. Conclusion: Volatility Is Not a Crisis — It’s a Reset to Separate Weak from Strong

**Short-term pressure, medium-term still bullish, long-term view on AI.** The biggest current risks stem from oil prices and global long-term bond yields. However, Taiwan’s AI industry fundamentals remain the strongest pillar of the bull market. Rather than panic-selling, investors should use this volatility to reassess portfolio quality, optimize capital allocation, manage risk, and prepare for the next major upward leg after market stabilization.

Ne Zha Market Momentum

Stock Selection Over Market Timing

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Source: Chen Hsueh-Jin, Analyst at Luen Yuan Investment Advisory

Our company has no improper financial interests in the securities we recommend. Past performance does not guarantee future returns. Investors should make independent judgments, conduct careful evaluations, and bear their own investment risks.