Taiwan Stocks Surge, Has Hot Money Returned? Analysts Reveal: 'Yes, But Only These Stocks Are Benefiting'

U.S. stocks surged last Friday after July's non-farm payroll data came in weaker than market expectations, lowering expectations of Federal Reserve rate hikes. This momentum carried over to Taiwan's stock market today (10th), which opened strong and continued to climb, closing up 702 points at 44,928. In response, financial expert Ruan Mu-Hua, on the program 'Wealth Path,' interviewed Uni-President Futures analyst Lu Yu-Heng, who stated, 'Actually, hot money has already returned to the market.' However, this return is not evenly distributed across all stock categories—only 'these types of stocks' are primarily benefiting from the rebound.

Ruan Mu-Hua noted that the old saying 'once the wound heals, the pain is forgotten' seems to be repeating itself in Taiwan's stock market, as margin lending balances have surged again. The main board saw nearly NT$100 billion added yesterday, while the OTC market added approximately NT$50 to 60 billion. 'Are investors once again rushing into margin trading and leveraged positions?' he questioned.

Has hot money truly returned? Margin trading and 2x leverage ETFs are back

Lu Yu-Heng pointed out that not only has margin lending increased, but 2x leveraged ETFs have also dominated the top of trading volume rankings since the recent rebound began. This indicates that investors who avoided the previous downturn are now re-entering with leverage to capture this rebound. However, despite strong revenue performance, TSMC's after-hours reaction was 'rather lukewarm,' failing to see a significant surge.

Lu analyzed that many large-cap stocks did not follow this broad rally, making it difficult for the index to smoothly break through the 45,000-point mark. So, has hot money really returned? 'From the perspective of the S&P 500 and Dow Jones hitting new all-time highs, hot money has indeed returned—but its distribution is not uniform.'

He explained that funds had already rotated out of previously high-flying stocks like Yageo and UMC. Neither Taiwan nor South Korea's markets have yet recovered to their prior peaks, 'indicating that the previous leveraged rally was largely driven by FOMO (fear of missing out), pushing P/E ratios too high. Now, investors are shifting toward stocks with more reasonable valuations and solid revenue growth.'

Why are Yageo and SK Hynix rebounding slowly? The FOMO hangover

Lu noted that while memory stocks like Nanya Technology and Winbond are approaching historical highs, why haven't leaders like SK Hynix and Samsung recovered as quickly? The reason is that their previous highs were FOMO-driven, so despite solid fundamentals, capital has not rushed back, resulting in a slow rebound.

Lu believes 'hot money actually started returning from late July, when the U.S. and Japan began joint currency interventions.' Since then, the market has shifted from reacting to negative news to focusing on positive developments. But does every sector benefit equally? 'Not at all. Instead, stocks that didn't rise much earlier or had already corrected are now the first to enjoy the rebound fueled by returning hot money.'