Is Taiwan's Stock Market Rally Hollow? Former Government Fund Manager Warns 'Market Will Form a Second Bottom': Stock Holdings Capped at 50%

On the 12th, Taiwan's stock index rose 397.35 points to close at 45,518.07, with a trading value of NT$858.732 billion. Foreign investors, mainland capital, investment trusts, and proprietary traders—all three institutional investors—bought stocks simultaneously, totaling a net purchase of NT$22.522 billion.

In response, Huang Feng-Kai, former portfolio manager of a government fund, appeared on the financial program 'Wealth Path' on the 12th and stated that although the market has rebounded above the quarterly line, experienced investors remain hesitant to buy.

Huang explained that the monthly charts for both the main board and the over-the-counter market have not yet formed an upward hook, and technically, only a 'bend' pattern provides real support. The current rally, he said, lacks downside protection and is therefore a 'hollow rally.' The strongest AI sector has not fully surged, while capital has instead flowed into non-AI sectors such as bicycles and Hiwin.

Huang warned, 'Once the neckline is broken, the bullish structure will collapse.' He noted that major players are only engaging in short-term trades on stocks with reliable earnings reports, while retail investors were largely wiped out during the previous margin call wave. He expects the market to pull back again and 'form a second bottom.' Investors should avoid blindly chasing prices during rallies and must remain extremely cautious. With the market just above the neckline, a break below would destroy the bullish setup. He recommends capping stock holdings at 50%.

Huang mentioned that foreign investors' buying of stocks like Powerchip is linked to trends in silicon capacitors and IP from APMO. He advised not to overinterpret foreign institutional moves, but instead to focus on 'undervalued stocks unfairly affected by government trading suspensions'—such as Hoshentang, which has solid fundamentals and strong numbers but was only recently released after being suspended for the second time, leaving its stock price significantly lagging behind the broader market.

Going forward, investors should keep contrarian indicators in mind and monitor the big picture using weekly charts. Even if a stock is fundamentally strong and breaks above a major weekly high, investors must 'immediately put on a helmet to hedge risk' and 'never face the storm naked.'

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