The results of the U.S. midterm elections were announced, with the Democratic Party winning a resounding victory and gaining control of both houses of Congress. Xie Jinhe, chairman of Caixin Media, said that U.S. President Trump suffered a major setback in this "midterm exam" and the global market is also facing a situation of re-finding its direction. He pointed out that in addition to the Republican Party's defeat, factors such as huge capital expenditures for artificial intelligence (AI), corporate financial reports and competition in the memory industry have also put global stock markets under pressure. However, he believes that the Taiwan stock market is still the strongest market in the world this year. As for challenging the 50,000-point mark, I am afraid that it will have to wait until next year.
Xie Jinhe posted a post on Facebook with the title "Trump's midterm exam was rigged! The world is regaining its direction!" He pointed out that the Democratic Party won a landslide victory in the U.S. midterm elections, taking over both the House of Representatives and the Senate. Trump was unconvinced by the election results and claimed that the Republican Party lost the election because his name was not on the ballot.
However, Xie Jinhe believes that the Republican Party’s defeat was not caused overnight, but was the result of the accumulation of long-term factors. He pointed out that U.S. bond yields continue to rise, prices are soaring, and people's lives are becoming more and more stressful. Therefore, the Trump camp's defeat has long been expected.
Talking about the capital market, Xie Jinhe said that global stock markets have continued to fall since October, which first reflects the possibility that Trump will lose the midterm election and the risk that the Republican Party will lose control of the House of Representatives and the Senate.
The second important factor is the huge AI arms race. Xie Jinhe pointed out that the capital expenditures of the four major cloud service providers (CSPs) this year reached US$745 billion, causing heavy free cash flow outflow pressure. Among them, Amazon’s free cash flow in the past 12 months was negative $42.36 billion, which shocked the market and made investors worry about when the huge investment in AI will be converted into strong profits.
Xie Jinhe further pointed out that the market is also worried that many states controlled by the Democratic Party will resist the construction of data centers and power systems, and is even more worried about the possible rotation of political parties in Texas. He said that as a result, the Republican Party lost the state's senatorial and gubernatorial elections, and Tesla CEO Elon Musk was the first to suffer.
He believes that Trump was originally an important force in promoting AI infrastructure. Now that the Republican Party has lost control of both houses of Congress, Trump's policies are being constrained. Whether it will further affect the future development of the AI industry deserves a re-evaluation by the market.
The third impact comes from corporate financial reports. Xie Jinhe pointed out that in addition to Google and Amazon, the one that shocked the market the most this time was Intel. The company's stock price plummeted 28.58% on the day the company announced its financial report, which also affected many large enterprises in Taiwan, including Delta and Yageo.
He specifically mentioned that Yageo's stock price dropped to 417 yuan this time, even lower than the low point when the stock price fell from 1,220 yuan in July this year, which was described by the market as "buy Yageo and we will meet again in the next life."
The fourth factor is the new wave of impact faced by the memory industry. Xie Jinhe said that Changxin Technology’s “4F Square” technology has caused a major blow to memory stock prices. South Korea's Samsung Electronics and SK Hynix have just survived the impact of 2x leverage, and now they are facing a new wave of pressure; Chinese semiconductor-related companies, including Hua Hong Semiconductor, SMIC and GigaDevice, have also seen sharp declines in their stock prices.
In response to the recent trend of Taiwan's stock market, Xie Jinhe pointed out that Taiwan's stock market has shown a turbulent atmosphere recently, but if compared with major global markets, its performance is still relatively strong.
He said that the Indonesian stock market was the worst-performing market this year. The South Korean stock market fell by nearly 50%, the Shenzhen stock market in China fell by more than 30%, and the Shanghai and Hong Kong stock markets fell by about 20%. He also mentioned that the China Securities Regulatory Commission has recently suspended initial public offerings (IPOs) of new shares in order to rescue the market.
In comparison, Xie Jinhe pointed out that Taiwan's stock market has experienced the largest increase this year. Although it fell by 8,113 points or 16.24% in this wave, it is still the strongest market in the world.
Looking forward to the market outlook, Xie Jinhe believes that the global capital market will next enter a stage of adjustment, consolidation and rectification, and will re-find its future direction. As for whether the Taiwan stock market can challenge the 50,000-point mark, he predicts that it may have to wait until next year.
