Volatility Is All Part of the Main Players' Conspiracy — Once It Explodes, There Will Be No More Sweet Prices

1. Market Structure: Volume-Contraction Volatility, Bullish Framework Still Intact

Today, the Taiwan stock market showed a 'volume-contraction volatility, closing with a doji candle.' The index opened higher, rising 440 points to touch 45,160, but lacked follow-through buying momentum. It closed in a narrowed range with volume shrinking to approximately NT$794.1 billion.

Currently, the index is suppressed below the 10-day moving average, yet still supported by the monthly and quarterly lines. This indicates a short-term consolidation at elevated levels rather than a reversal of the bullish trend.

Recent market movements continue to be influenced by multiple variables, including global bond markets, geopolitical tensions, Fed policy, and AI valuations. Until volume clearly expands, the index is likely to remain in a '43K–46K range-bound oscillation' with sector rotation.

2. Macroeconomic Environment: Rate Hike Pressure Eases, But Policy Risks Remain

Recent U.S. CPI, PPI, and employment data have been relatively mild, significantly cooling market expectations for a September rate hike. Latest indicators suggest the probability of a September hike is around 30%.

However, the July FOMC minutes revealed that some officials remain concerned about persistent inflation and even support further tightening. Therefore, the current environment should be interpreted as 'reduced rate hike pressure,' not the complete elimination of rate hike risks.

The decline in long-term U.S. Treasury yields helps ease valuation pressure on tech stocks. However, structural pressures in the global bond market persist, warranting close attention to upcoming PCE data, employment figures, and messages from central bank summits.

3. Fundamentals: AI Remains Taiwan’s Key Long-Term Growth Engine

Taiwan’s economic growth, exports, and corporate profits continue to be driven by robust AI demand. AI server demand is expanding from training to inference, agents, and end-user applications, indicating a sustainable industrial growth cycle.

AI capital expenditures continue to grow, with benefits spreading from large-cap stocks like TSMC and Hon Hai to mid-tier suppliers in PCB, CCL, thermal solutions, power management, connectors, memory, passive components, optical communications, and server assembly. The market is closely watching the duration and scale of AI infrastructure investments.

Therefore, even if short-term indices face valuation and sentiment pressure, as long as AI demand and corporate earnings trends remain intact, pullbacks should be viewed as medium-to-long-term opportunities to rotate into stronger, fundamentally sound stocks.

4. Key Near-Term Catalysts: NVIDIA Earnings + Global Central Bank Summit

Next week, market focus will center on NVIDIA’s earnings report, the Global Central Bank Annual Meeting, and U.S. PCE data—events that will directly influence AI sector valuations and overall risk appetite.

For NVIDIA’s earnings, key areas to monitor include Blackwell chip shipments, AI data center demand, gross margin outlook, and capital expenditure guidance. Even if results exceed expectations, investors should be cautious of short-term volatility due to 'buy-the-rumor, sell-the-news' dynamics.

Thus, aggressive chasing should be avoided around the earnings release. Instead, use the volatility to assess individual stocks’ fundamentals and positioning strength.

5. Investment Strategy: Stock Selection Over Market Timing, Buy Dips, Avoid Chasing Highs

The core investment principle remains: 'Buy on dips in batches, rotate out weak stocks, buy low, avoid chasing highs.'

Stock selection should be based on dual verification of 'Q2 earnings + July revenue,' prioritizing companies with stable gross margins, profit growth, record-high revenues, and strong visibility for orders in the second half of the year and into next year.

Thematic focus should remain on AI servers, PCB/CCL, CPO/optical communications, thermal solutions, power management, memory, passive components, advanced packaging, and TSMC’s 2nm supply chain.

Conversely, stocks exhibiting high P/E ratios, earnings lagging behind price, declining margins, or pure theme speculation without order backing should be trimmed appropriately.

During this period of weak volume, maintaining around 50% cash reserves enhances liquidity flexibility. Increase equity exposure only after negative catalysts fade, the index reclaims the 10-day line, and clear volume expansion emerges.

In summary, the Taiwan stock market is not in a 'bullish phase end,' but rather in a stage of 'digesting positives, managing negatives, and awaiting the next catalyst.' A 'pause before the leap' or 'down before up' scenario remains the most rational narrative. Rather than guessing index movements, investors should use this volatile period to reassess holdings and focus on undervalued, high-quality stocks with solid AI fundamentals, earnings growth, and strong order visibility.

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Source: Analyst Chen Xuejin,伦元投顾

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