Is Taiwan Stock Market Falling Back to 42,000 Points a Good Thing? Juan Mu-Hua Predicts Q3 'Correction Buying Opportunity': Irrational Sentiment Needs a Break

On June 17, Taiwan's stock market plunged 2,953.71 points (-6.47%), closing at 42,671.27, setting a record for the largest single-day point drop in history. The market closed at 42,671.27, triggering widespread panic among investors. Financial expert Juan Mu-Hua appeared on the program 'Bao Jie, What Do You Think?' and analyzed that 'Taiwan's stock market eventually needs to take a breather.'

Juan Mu-Hua emphasized the divergence between value and price. 'Suppose an item has a value of 100 yuan, but due to speculative buying, its price rises to 200 yuan. However, its intrinsic value remains 100 yuan — only temporary sentiment has inflated the price.' He cited Delta Electronics (2308) as an example. The company's stock price surged this year, peaking at 2,580 yuan, but later fell below 2,000 yuan and broke below the quarterly moving average. This was due to the stock's first-half surge exceeding 100%, surpassing reasonable price-to-earnings (P/E) ratios, prompting market players to take profits.

Juan Mu-Hua took profits in early June after noticing Taiwan's rolling P/E ratio had reached 30 times and the price-to-book ratio (PBR) had hit 4 times. He pointed out that Taiwan's average rolling P/E over the past decade has been around 16 times, making 30 times an extremely high and historically abnormal level, indicating potentially irrational market sentiment. 'Seeing this situation, of course, I decided to take profits,' he said.

However, Juan Mu-Hua remains optimistic about Taiwan's forward P/E ratio. He explained that listed and OTC companies in Taiwan may see earnings per share (EPS) growth exceeding 45% this year. Based on this, the current rolling P/E of 30 times could drop to around 22 times. Given that artificial intelligence (AI) is driving EPS growth, he believes this level is acceptable — even a forward P/E above 25 times is justifiable. 'Taiwan's stock market has risen significantly over the past four quarters. It eventually needs to rest — that's why we should assess it using the rolling P/E. But starting in late Q3, we can shift to evaluating it with the forward P/E.'

He stressed, 'When the market corrects in Q3, that will be a very good thing. A market correction creates the best buying opportunity.'

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