Fed dovish expectations take hold, Taiwan stocks stabilize above 28K level, three major institutional investors buy a total of 19.117 billion yuan in a single day

The Federal Reserve (Fed) has a 96% chance of cutting interest rates in December, prompting a rotation of funds in Asia. The Taiwan Weighted Index closed today at 28,303.78 points, up 322.89 points (1.15%), breaking through and stabilizing above the 28K level, signaling a recent technical strength. The three major institutional investors bought a combined total of NT$19.117 billion, hitting a new single-day high, with trading volume expanding to NT$424.744 billion, indicating strong bullish consensus.

The Three Major Institutional Investors Fully Engaged, Foreign Investors Lead Buying in Large Caps and Semiconductors

Today, the three major institutional investors bought NT$19.117 billion, continuing a four-day buying streak, clearly reflecting strategic end-of-year portfolio adjustments.

Foreign Institutional Buying Dominates: Net purchase of NT$14.088 billion, maintaining positive momentum for four consecutive days, with a total net inflow of NT$36.8 billion this week. Foreign investors focused on large-cap and memory concept stocks as the Taiwan market closed higher, including TSMC (bought 10,500 shares, stock up 2.4% to NT$1,495, a gain of NT$35), Hon Hai (bought 5,200 shares), and Nanya Technology (bought 2,500 shares).

Investment Trust Shifts to Financial Sector: Net buy of NT$1.029 billion, indicating a clear strategic shift. Investment trusts are starting to avoid high-priced tech stocks and instead are deploying funds into financial groups like Fubon Financial and Taishin Financial (bought 3,801 shares of Fubon Financial), showing a rotation of capital from tech to financials.

Proprietary Traders Target Emerging Concepts: Net purchase of NT$4 billion, mainly focusing on memory and PCB sectors, including Winbond Electronics (bought 1,800 shares) and Unimicron (bought 1,740 shares), echoing the heat in AI server industry chains.

Large Capital Rotation in Asia, Low-Valuation Financial Stocks Become New Favorites

With the US dollar index falling to 102.5, indicating a weak trend, foreign capital has net flowed into Asian markets by over US$15 billion this week. The core logic of this rotation is: capital is withdrawing from overvalued US tech stocks and shifting into undervalued Asian financial and consumer stocks.

Major Asian markets gained today. The Nikkei 225 rose 1.2% to 39,800 points, South Korea’s KOSPI increased 0.8% to 2,650 points, China’s Shanghai Composite up 0.3% to 3,150 points, and India’s Nifty 50 up 0.9% to 24,200 points. India and Vietnam each attracted US$2 billion in capital, benefiting from 6-7% GDP growth and the dividends of global supply chain shifts.

Japanese foreign investment share decreased to 40%, but inflows shifted focus to banking stocks (up 2.5%), reflecting institutional revaluation of value under low-yield environments. Leading Chinese manufacturing stocks like CATL rose 1.1%, benefiting from signs of consumption recovery.

Internal Rotation of Taiwan Stocks Accelerates, Short-term Speculation Signals Emerge

The Taiwan market closed above 28K, but internal sector performance varied significantly, with aggressive capital concentrating in specific concepts.

Semiconductor Sector Booming: The semiconductor index surged 2.31%, with five stocks hitting the daily limit: Macronix, Winbond, Vantec, Siliconware Precision Industries, and East Asia. Nanya Technology rose 6.86% to NT$163.5, driven by a 15% increase in DRAM and NAND prices and inventory replenishment demand.

Glass and PCB Rally: Glass stocks led with a 4.22% increase, with Taiwan Glass up 4.8% to NT$38.2 and Fuhong Technology up 7.73%. PCB stocks continued their hot streak, with Unimicron up 4.8%, benefiting from full orders for AI servers and a global electronics supply chain recovery.

Large Caps and Financials Follow Suit: TSMC rose 2.4% to NT$1,495 (setting a new high for the Taiwan market), contributing over 200 points to the index; Hon Hai and MediaTek increased 0.43% and 1.05%, respectively. Financial stocks rose 0.28%, with Fubon Financial and Taishin Financial both up over 2%, aided by the NT dollar appreciating to NT$31.25, reducing currency exchange costs.

However, the Taiwan Stock Exchange also pointed out 15 stocks with high cancellation rates of 30-50%, including Nanya Technology, Winbond, Unimicron, Taiwan Glass, and others in semiconductor, PCB, and shipping sectors. This indicates that although bullish sentiment is strong, short-term speculation and main force control risks are also rising.

Year-End Portfolio Adjustment Logic Supports Market, but Fed Decision Risks Caution

Fubon Investment Consulting Chairman Chen Yiguang analyzed that this rebound in Taiwan stocks is driven by dovish Fed expectations and year-end portfolio adjustments. Historical data shows that after a 2.15% decline in November, December’s average gain is 4-6%, consistent with seasonal patterns. Taiwan’s market capitalization has reached NT$82.5 trillion, and trading volume is expected to rebound to NT$4,500 billion.

Technically, the weighted index’s RSI has risen to 68, indicating a bullish zone, with support at 28,000 points and resistance at 28,500 points. PGIM Prudential analyst Liao Bingkun pointed out that the profitability of AI will continue into the end of the year, and if the Taiwan market closes above certain levels, it could challenge 28,500 points.

However, risks must also be carefully assessed. Moore Investment Consulting analyst Hsieh Wen-en warned that year-end portfolio adjustments may tempt retail investors to chase high prices. If the core PCE data released after the Fed meeting exceeds expectations, it could trigger profit-taking, and a repeat of the August 2024 Taiwan index futures limit-down event is possible.

Investment Advice: Reduce Positions on Rallies and Focus on Fundamentals

For investors, this rebound in Taiwan stocks is not just a simple extension of the Fed effect but also reflects the strategic importance of Asian markets amid global capital rotation. The recommended strategies are:

Reduce High-Risk Speculative Stocks on Rallies: For stocks like Nanya Technology, Winbond, and Unimicron that have surged in the short term, set stop-losses within 5% and consider taking profits on rallies to avoid being trapped at high levels.

Shift to Fundamentally Stable Stocks: Prioritize positions in financial giants like Fubon Financial and Taishin Financial, as well as Taiwan Semiconductor Manufacturing Company (TSMC), which combine attractive dividend yields with solid fundamentals.

Diversify Holdings and Monitor Policy Changes: Keep close watch on tonight’s US economic data and the upcoming Fed decision, adjusting positions accordingly based on the results.

Overall, the fact that the Taiwan market closed above 28K indicates a technical breakout, but caution is warranted regarding overheated sectors and internal sector divergence, which are prudent considerations for investment.