Foreign Sell-Off Pushes Taiwan Stock Below 44,000, Dollar Hits 18-Month Low

Taiwan’s stock market experienced a sharp decline in the afternoon session, with the Taiwan Weighted Stock Index closing down 1,612.60 points, a drop of more than 5%, breaching the critical 44,000-point level. This downturn was accompanied by heavy selling by foreign investors, resulting in a market capitalization loss exceeding NT$220 billion. Market sentiment shifted from bullish to panic, driven by investors reassessing risk assets amid concerns over Federal Reserve rate hike expectations, rising global risk aversion, and slowing economic growth in mainland China.

A primary driver of the foreign selling was the U.S. Federal Reserve’s announcement earlier this month to maintain the federal funds rate between 4.75% and 5%, while hinting at potential for further rate hikes. The high-interest-rate environment in the United States has strengthened the U.S. dollar, reducing investor demand for high-yield but high-risk emerging market assets. Coupled with widespread global concerns regarding inflationary pressures, geopolitical conflicts, and asset bubbles, foreign investment confidence in the Taiwan stock market has been undermined.

The New Taiwan Dollar depreciated during trading to below NT$32.80, hitting its lowest point in a year and a half, with the currency touching a low of NT$32.86. This represented a depreciation of more than 0.26 NT$. The currency’s decline has placed pressure on import costs, pushing up import prices and subsequently affecting the Consumer Price Index. Although Taiwanese exporters have benefited from the stronger U.S. dollar, rising costs for imported raw materials and energy have introduced uncertainty into overall economic growth.

Technology stocks were the hardest-hit sector. Individual stocks in the semiconductor, IC design, and electronic components sectors saw significant declines due to foreign...