■Huang Botang
Recently, Taiwan stocks have performed strongly and continue to attack the 50,000-point integer level. Mainly because the U.S. non-farm payrolls data was lower than expected, the Federal Reserve (Fed) officials' comments were dovish, and the market's expectations for the FOMC to raise interest rates again at the end of October have cooled. In addition, the growth momentum of the AI industry is strong, and funds are returning to risky assets in advance. The 50,000-point level for Taiwan stocks may bring short-term shocks, but the mid- to long-term trend is still positive. Investors can deploy AI computing power and semiconductor supply chain-related groups in batches.
Corporate profits offset the impact of high interest rates; Taiwan stock market remains strong in mid- to long-term resilience
Please read on...
Although U.S. bond yields remain high, the pressure on the stock market has been significantly blunted. The main reason is that corporate profit growth is strong enough to absorb rising capital costs. Looking back at the three cycles of Fed interest rate hikes since 2000, Taiwan stocks rose by an average of 3.6% after one year, and by an average of nearly 20% after two years. In 2022, due to supply chain disruptions caused by the COVID-19 epidemic, U.S. inflation once reached over 7%, forcing the Federal Reserve to raise interest rates by 3 percentage points within half a year. Even so, Taiwan stocks still rose by 16% two years after the interest rate hike. It can be seen that rising interest rates may not suppress the stock market. As long as corporate profits continue to grow, there is still room for the market to rise.
The AI industry is still the mainstream of the market, and investors can deploy AI computing power and semiconductor supply chain-related groups in batches. (Central News Agency)
In terms of fundamentals, the AI industry is still the mainstream of the market. The new generation AI platform started shipping in the fourth quarter and will further expand in 2027. Coupled with the simultaneous increase in self-developed chips by cloud companies, the profit outlook for the AI supply chain continues to jump. You can pay attention to AI components, PCB upstream and CPO supply chains. Financial reports will be announced in the near future, and investors are advised to pay close attention.
In addition, in terms of production and finance, as the global oil refining industry enters an upward cycle, the plasticizer group also benefits from AI-driven demand for high-end electronic materials, which has the potential for transformation. As for the financial group, bank lending momentum is strong, and the securities industry can benefit from increased market volume, with profits in the first seven months increasing by more than 200% year-on-year. It is recommended to focus on financial holdings with good asset quality, stable profits and high yields, and make a volatile layout.
Four major bullish factors escort Taiwan stocks into a tough market in the fourth quarter
Overall, Taiwan stocks have gradually shaken off the consolidation pattern in the third quarter and officially entered the bullish stage of the fourth quarter. Supported by multiple positive factors such as reduced pressure to raise interest rates, continued growth of the AI industry, upward revisions in corporate profits, and abundant financial momentum, the Taiwan stock market's 50,000 points is just a new milestone, not the end of this wave of market trends. However, Taiwan stocks have accumulated considerable gains in the short term, and high-end shocks may occur in the future. Coupled with the lingering inflationary pressure, Fed policy trends, and uncertainties surrounding the U.S. midterm elections, investors should avoid excessive pursuit of prices and adopt an "active long bias and batch layout" to seize investment opportunities brought by industrial trends and capital trends. (The author is the general manager of SinoPac Securities Investment Consulting Company)
Grasp the economic pulse with one hand. Click here to subscribe to Free Finance Youtube channel
