Guoan Fund enters the market to protect the market. Legal person: 3 conditions are needed to truly stop the decline.

Taiwan stocks plummeted by more than 5,000 points last week. Guoan Fund announced its 10th entry into the market last Friday, spurring Taiwan stocks to rebound strongly for two consecutive days. In this regard, Cathay Securities Futures analyst Guo Jingwei reminded that investors must still remain cautious and fearful, because historical experience shows that the market may still reach a low point after the government protects the market.

Kuo Jingwei reviewed the market dynamics last week. The U.S. midterm elections set off a blue wave, which triggered market concerns about the tightening of data center power consumption, environmental impact assessment, and construction review, which would drag down the progress of AI expansion. Coupled with the impact of wild selling by foreign investors, Taiwan stocks once fell below the annual line, and the confidence of bulls was greatly tested. Seeing that the selling pressure continues, the government has taken action to respond. The Financial Supervisory Commission has introduced a series of short-selling measures, including reducing the bond selling limit, increasing the margin for securities lending from 90% to 130%, relaxing collateral requirements, and encouraging companies to implement treasury shares. The main purpose is to increase the cost of shorting and gain breathing space for the market.

For the Guoan Fund’s announcement of its 10th entry into the market and spurring a surge in Taiwanese stocks, does this mean that all the bad news has been exhausted? Guo Jingwei analyzed that looking back on the history of Guoan Fund's previous 9 market protections, 6 of them finally achieved positive returns; historical average data shows that the weighted index rose by about 6% in the 5 trading days after the announcement of the entry, by about 4% in the next 20 trading days, and by about 3.3% in the next 60 trading days.

However, Guo Jingwei particularly emphasized that the Guoan Fund is not a magic wand for the stock market. The entry time may be a relatively low point in the medium and long term, but the day of entry is usually not the lowest point. In the previous 9 experiences of market protection, only two times happened to fall at the low point of the band. In other cases, the market will still break through the bottom again. Guoan Fund can temporarily help the market stop bleeding, but it does not guarantee an immediate take-off. Especially at present, the index is facing counter-pressure at the elbow of the monthly and quarterly lines around 45,000. The selling pressure from above is still to be digested, and a second leg of backtesting cannot be ruled out in the future.

In terms of protection targets, looking back at the historical list of protection targets, large value stocks such as TSMC, Delta Electronics, Quanta, and Hon Hai have been included many times. These companies have a greater impact on the index, help stabilize market confidence, and more importantly, have solid fundamental support. Observing the latest performance, Quanta's October revenue increased by 104% year-on-year, Hon Hai's revenue increased by 46% year-on-year, and Delta Electronics also increased by 30% year-on-year. Once market confidence stabilizes, good value stocks with sustained operational growth may become the priority for capital replenishment.

Kuo Jingwei concluded that the entry of Guoan Fund is a boost for bulls, but it is by no means an escape from death for the stock market. In the future, it is still necessary to observe the convergence of foreign selling pressure, the stop of the depreciation of the New Taiwan Dollar, and the continued sharp reduction in financing, so that Taiwan stocks can truly move from "stopping the bleeding first" to "really stopping the decline."