Since August’s low point, Taiwan’s weighted stock index has rebounded by 19%, marking one of the best performances globally. As we enter the third quarter earnings season, led by TSMC’s earnings call, there is renewed excitement in the market, particularly around artificial intelligence (AI). Many investors believe the momentum in Taiwan’s stock market may continue.
TSMC’s earnings exceeded expectations, and the optimistic outlook surrounding NVIDIA’s new chip shipments has eliminated previous concerns about demand. In the coming weeks, earnings reports from tech companies in Taiwan’s advanced semiconductor hub are expected to attract even more capital.
Xin-Yao Ng, an Asian equities manager at abrdn plc, noted, “The fundamentals remain very strong, and broadly speaking, a large portion of Taiwan’s stock market is tech-oriented, especially in the semiconductor sector.” He emphasized that many Taiwanese companies could be considered as extensions of “NVIDIA and TSMC’s concepts.”
The resurgence of the Taiwan weighted stock index since its August low has been impressive, with TSMC’s stock hitting new highs. Last Friday, foreign investments reached a two-month peak, marking the first month of net buying since June.
More than 95% of the constituents in the Taiwan weighted index are set to release their earnings reports by mid-November. With the revival of the AI trend, any earnings surpassing expectations could further boost stock prices.
Morgan Stanley strategists, including Mixo Das, recently reported, “Following the disappointing third-quarter performance, AI confidence has rebounded, prompting us to upgrade our rating on Taiwan’s tech stocks to overweight.” They anticipate that earnings growth in tech stocks will continue until 2025.
This recent rebound has pushed the projected price-to-earnings ratio of the Taiwan weighted index to 17 times, exceeding the five-year average. However, the robust growth outlook gives bulls more reasons to buy.
Randy Abrams, head of Taiwan research at UBS, stated, “We believe this rally still has momentum. Regarding AI, we anticipate that the arms race among hyperscalers, businesses prioritizing AI integration to enhance revenue and efficiency, along with additional sovereign investments, will drive strong investment well into 2025.”
