Taiwan Stock Market Records Historic Largest Drop and Gain – Is This a Bear Market? Institutions Analyze Causes and Investment Opportunities

Taiwan's stock market saw dramatic swings in July, with the TAIEX first recording its largest single-day drop in history on July 17, then posting its largest single-day gain on July 31. Market sentiment flipped drastically within just two weeks. Institutional investors believe multiple factors—including valuation corrections in AI-related stocks, capital rotation, and geopolitical tensions—have collectively intensified recent market volatility.

Nomura Asset Management notes that such situations are not unprecedented. Historically, when the TAIEX has pulled back more than 15% from a peak, short-term volatility and consolidation may persist, but medium-to-long-term trends typically revert to corporate fundamentals. However, each correction has unique underlying causes, resulting in varying recovery speeds and rebound patterns.

Unlike the 2022 bear market, this correction is primarily a valuation adjustment

Chang Chi-wen, Head of Strategy and Marketing at Nomura Asset Management, analyzes that the current market environment is fundamentally different from 2022. Back then, the global tech sector faced simultaneous headwinds: high inflation, rapid Fed rate hikes, corporate inventory drawdowns, and weak end-demand—making it a classic cyclical bear market.

In contrast, the U.S. economy remains in expansion mode, while AI-driven capital expenditures and corporate earnings outlooks continue to provide support. The recent market pullback mainly reflects valuation adjustments after significant rallies in AI stocks, coupled with portfolio rebalancing and reduced investor risk appetite—not fundamental deterioration like supply gluts or inventory imbalances in the tech sector.

Chang believes this correction resembles the event-driven pullback seen in 2025 rather than the 2022-style cyclical downturn, with distinct market conditions and drivers.

Heightened volatility creates greater room for active stock-picking strategies

During periods of increased market volatility, active investment strategies are seen as better positioned to outperform.

Yu Ching-te, portfolio manager of the Active Nomura Taiwan Select ETF (00980A), states that high-volatility environments often offer the best opportunities for active managers to generate alpha. By continuously monitoring corporate fundamentals, industry trends, and market dynamics, and flexibly adjusting portfolios, active managers can focus on companies with sustainable competitive advantages and strong earnings growth potential—turning short-term market fluctuations into long-term investment opportunities.

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