Taiwan Stock Market Rebounds Strongly in August, These ETFs Surge Even Higher! Institutional Investors Highlight Key Factors for Next Leg Up, Potential Challenge to 48,200 Points

Following a technology stock valuation correction in July, Taiwan's stock market (Taiex) launched a strong rebound in August. Today (14th), the index briefly approached the 46,400-point level, surging approximately 17% from the low point on July 30. Year-to-date gains have rebounded back to around 60%. As the index rapidly reclaimed its 200-day and 50-day moving averages, the extent of further upside potential has become a focal point for market participants.

According to Cmoney's statistics, six out of the top 10 best-performing active Taiwan equity ETFs year-to-date have regained over 70% in returns. Leading performers include Active United Taiwan Growth (00981A), Active Fuhwa Future 50 (00991A), and Active Capital Projects Technology Innovation (00992A). Newly launched funds such as Active First Securities Taiwan Excellence (00994A) and Active CTBC Taiwan Outstanding (00995A), introduced in January this year, have also entered the top 10.

Notably, these leading ETFs have generally risen 20%–30% since the market low on July 30—significantly outperforming the broader market. This reflects that during the rapid market recovery, capital continues to concentrate in strong sectors backed by growth themes and solid fundamentals.

Locked-in Selling Pressure Remains – Taiwan Market Still in Bullish Consolidation

The Taiwan market has swiftly reclaimed its 200-day and 50-day moving averages recently, but today’s index showed range-bound trading at elevated levels, indicating profit-taking and selling pressure from previously locked-in positions following the sharp rally.

Chang Cheng-chung, portfolio manager of Active First Securities Taiwan Excellence, expects the market to enter a “high-level consolidation” phase. The main reason is the heavy selling pressure from investors holding shares acquired at previous highs. Only after repeated testing and digestion of these positions can the market realistically challenge the historical peak of 48,200 points.

However, some strong individual stocks have already broken past prior highs, reflecting that significant bullish momentum still exists within the market. Chang noted that the maximum decline in July was 17%, and the August rebound was similarly about 17%. In a bull market, such oscillations represent reasonable volatility. In the medium term, he still believes the Taiwan market remains in a bull trend, though the index may gradually climb higher through continued consolidation.

Declining Positional Pressure – Foreign Institutional Buying Key to Recovery

In addition to technical recovery, there are signs of improvement in market positioning. Chang stated that during the July market correction, retail investors actively increased their holdings in Taiwan equity ETFs. Combined with foreign institutions shifting from net sellers to buyers recently, market positioning has gradually stabilized.

On the other hand, the July correction also rapidly cooled down speculative margin trading positions that had accumulated earlier. Margin debt declined by over 10% during the correction period and currently stands around TWD 550 billion. Compared to the volatile swings seen from late July to early August, the market has gradually stabilized. If healthy positioning is maintained going forward, it will support the market in finding new catalysts for upward momentum.

AI Earnings Exceed Expectations – Next Leg of Gains Hinges on Fundamentals

Chang stated that based on second-quarter earnings reports and corporate guidance from listed and OTC companies, the proportion of upward revisions to earnings forecasts in various tech sub-sectors clearly exceeds downward revisions. Notably, AI-related groups have delivered earnings performance even stronger than market expectations.

He added, 'If the growth of the AI industry continues to spill over through supply chains and capital expenditures, further driving fundamental improvements in non-AI sectors, it will provide substantial momentum for the Taiwan market to resume its upward trajectory after digesting selling pressure at high levels.'