Taiwan’s benchmark stock index staged a sharp multi-day recovery, reclaiming ground after a steep bear market plunge driven by artificial intelligence sector volatility and monetary policy pressure.
Taiwan Shares Rebound as Tech Earnings Drive Confidence
- Taiwan shares mounted a near-4,000 point rebound, pushing the weighted index to 43,675.12 as state intervention and strong tech earnings expectations restored buyer confidence.
- Fund managers at Allianz Global Investors say cloud capital expenditures—projected to hit $1.1 trillion by 2027—are the fundamental driver keeping the AI growth thesis intact.
- Analysts warn that high interest rates and tight valuations mean the market will transition away from broad-based rallies toward selective stock picking in supply chains like liquid cooling, CPUs, and optical communications.
Government Intervention Fuels Historic Rebound
Taiwan shares posted their second-largest single-day point gain on Monday after the management committee of the National Financial Stabilization Fund authorized market intervention following heavy recent losses, Focus Taiwan reported. The Taiex ended up 1,960.06 points, or 4.94 percent, at 41,661.70, breaking a seven-session losing streak that had pushed the technology-heavy market into bear territory, Livemint noted.
Before the rally, the index had tumbled about 10,267 points, or 20.55 percent, from an intraday high of 49,968.92 points recorded on October 6 as investors worried about AI development financing. “With the government’s pledge to intervene in the market, investor sentiment improved, prompting many investors to buy on dips today,” Kevin Su, an analyst at Hua Nan Securities, told Focus Taiwan.
“Buying was also fueled by a rebound in U.S. tech stocks on Friday, with major electronics stocks in focus. Many of them rose to their 10 percent daily price limits,” Kevin Su, an analyst at Hua Nan Securities, told Focus Taiwan.
The stabilization fund’s decision marked the 10th time authorities have authorized market intervention since the fund’s establishment in 2000 with an initial NT$500 billion. Alongside the intervention pledge, the Financial Supervisory Commission capped the volume of intraday short-sale orders for borrowed securities at 3 percent of a stock’s average daily trading volume over the preceding 30 days, down from 30 percent previously, while raising minimum short-selling margin requirements to 130 percent.
Surging Cloud Capital Expenditures Underpin Market Fundamentals
Beyond state policy support, fund managers emphasize that underlying industry fundamentals remain the core pillar for the market stabilization. Combined capital expenditure for the five major cloud service providers is estimated at approximately $805 billion for 2026, with the 2027 estimate revised upward to about $1.1 trillion, representing a 39.8 percent year-on-year increase, BigGo Finance reported.
| Cloud Service Provider Capex Period | Estimated Total Capex | Year-on-Year Growth |
|---|---|---|
| 2026 Actual/Estimate | About $805 billion (NT$26.5 trillion) | — |
| 2027 Forecast | About $1.1 trillion (NT$36.2 trillion) | 39.8% |
Hsiao Hui-chung, portfolio manager of the Allianz Taiwan Dam Fund and the Allianz Taiwan Technology Fund, told BigGo Finance that the long-term growth trends in AI, cloud servers, high-speed transmission, and specification upgrades remain entirely intact. Allianz Global Investors points to cloud capital expenditures estimated at $1.1 trillion in 2027 alongside continued AI infrastructure expansion as key medium- to long-term trends.
Following the initial policy-driven surge, the broader market continued climbing over subsequent sessions. A Taishin actively managed exchange-traded fund focused on small and mid-sized companies gained more than 20 percent over three trading sessions, leading a recovery that helped the Taiex reclaim the 44,000-point level, IntelliNews reported.
Valuations and Foreign Selling Pressure the Market Recovery
Despite the sharp recovery, institutional managers caution that the broader index is unlikely to replicate broad-based gains given elevated valuations and macroeconomic headwinds. The price-to-earnings ratio for the market sits near 19.75x, hovering close to its historical average of 18.7x, while the price-to-book ratio remains elevated at roughly 3.4x, two standard deviations above its 10-year average.
Foreign institutional investors remained net sellers during the initial surge, offloading NT$90.06 billion worth of shares on the main board, according to Focus Taiwan data. Meanwhile, macroeconomic variables such as Federal Reserve interest rate policy, long-dated U.S. Treasury yields, and geopolitical impacts on oil prices continue to shape the outlook.
“Stock selection will be more important than ever,” Hsiao told BigGo Finance, noting that capital is expected to concentrate more heavily in AI-related companies with clear visibility on revenue and earnings growth as the market shifts away from uniform rallies toward deep industry divergence.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
