Taiwanese Stocks Climb to Record Levels Amid AI and Semiconductor Surge

Published March 22, 2024

Taiwan's stock market has recently seen remarkable growth, setting new records as investors grow more confident in the island's tech sector. The surge in demand for artificial intelligence (AI) and advanced semiconductor technologies is driving this optimism, with expectations of further gains on the horizon.

Rally Rooted in AI and Semiconductor Demand

The Taiwan Weighted Index, a key indicator of the country's stock market health, hit a midday peak of 20,296 points. This climb is not just a blip on the radar; market analysts believe that Taiwan's stocks have the potential to soar even higher, possibly reaching up to 24,000 points by the end of the year.

Companies at the center of the AI revolution and semiconductor manufacturing are benefiting from global economic trends favoring high-tech industries. As other global sectors waver due to various economic uncertainties, Asia-Pacific’s technology firms, particularly those based in Taiwan, are thriving.

Economic Optimism and Investment Growth

The economic optimism is also shared by Alicia Garcia-Herrero, Natixis' Chief Economist for Asia Pacific, who echoes the sentiment surrounding AI and Taiwan's tech sector. She points out that since the recent elections, there's been a spike in fixed asset investments, adding to the momentum behind the stock market's climb.

Significant players in Taiwan’s tech industry, like chip giant TSMC, have seen impressive stock increases. TSMC, the largest component of the Taiex and a key supplier for Nvidia, has enjoyed a stock price increase of over 30% this year. Similarly, firms such as Quanta Computer and Wistron Corporation, known for their equipment assembly capabilities, have also seen their shares jump considerably.

Anticipation of Interest Rate Cuts

Another factor contributing to the optimistic market outlook is the anticipation of interest rate cuts by the Federal Reserve (Fed). These cuts would likely result in decreased borrowing costs, providing a boost to both businesses and consumers, and by extension, the equity markets.

While the technology sector is basking in the spotlight, some industry experts like Paul You, chairman of First Securities Investment Corporation, suggest that other areas of Taiwan's economy, such as precision machinery, automation technology, and consumer goods, remain underappreciated. A strategic shift or 'sector rotation' towards these sectors might be necessary for the market to achieve new record highs.

Despite these gains, the market growth in Taiwan has been relatively concentrated, with less than half of listed companies reporting positive returns. Goldman Sachs highlighted this 'narrow market breadth' in a recent report, indicating the growth is led by a few standout performers rather than being broad-based.

Taiwan, stocks, AI, semiconductor, economy, technology