Taiwan stocks face heavy catch-down pressure after holidays following US market plunge

After a series of closures due to typhoons and national holidays, the Taipei stock market is set to officially resume trading on the 27th. However, during the market hiatus, international financial markets have been anything but calm. In particular, the violent fluctuations in the U.S. stock market—especially the heavy sell-off in semiconductor stocks—have cast a shadow of uncertainty over the upcoming market opening. Market institutional investors generally expect that, under the dual pressure of catch-down sentiment and negative international developments, the Taiwan stock market will face considerable downward pressure upon reopening on the 27th. The benchmark index will not only face a strict test at its half-year moving average support level, but whether the psychological milestone of the whole-number mark can be held has also become a focal point for investors.

Reviewing the period of market closure, the performance of the U.S. stock market can be described as turbulent. The Philadelphia Semiconductor Index, acting as a global technology barometer, suffered a steep decline of 6.7 percent on the 22nd. A surge of selling pressure emerged in the market, raising investors' concerns over the valuations of high-tech stocks. Although a minor rebound of 0.44 percent followed on the 23rd, this rebound appeared quite feeble compared to the previous day's plunge and was entirely insufficient to recover the lost ground. This pullback in U.S. tech stocks was primarily driven by market concerns over the prospects of specific industries and the reallocation of capital among different sectors, which in turn placed downward pressure on Asian markets and related supply chains.

Regarding the upcoming market trajectory, a number of domestic analysts and institutional investors generally maintain a cautious and conservative stance. Institutions point out that because international markets declined while the Taiwan stock market was closed, the market will inevitably have to absorb the accumulated international negative news all at once when trading resumes on the 27th. Consequently, downward pressure at the open is nearly unavoidable. From a technical perspective, the market's current half-year moving average sits at approximately 45,121 points. This moving average, along with the psychological whole-number threshold of 45,000 points, will serve as a crucial defense line for the bulls to hold their ground. If this line of defense is breached, short-term technical selling pressure could expand further, and investor confidence will face a severe test.

In addition to the defense of technical support levels, global financial markets this week must also confront several major political and economic variables, which are key factors influencing the subsequent direction of Taiwan stocks. First is the upcoming interest rate decision meeting by the U.S. Federal Reserve. The market is closely watching the Fed's latest statements regarding the future trajectory of monetary policy. Particularly amid the interplay of inflation data and labor market performance, the pace and magnitude of interest rate cuts will directly impact global capital flows. Furthermore, the earnings reports and future outlooks to be released by U.S. tech giants this week are of paramount importance. The profitability and capital expenditure plans of these heavyweight enterprises will directly verify whether hot themes such as artificial intelligence can continue to sustain high stock valuations.

Looking at the current situation as a whole, although the Taiwan stock market faces dual pressures from international market pullbacks and technical corrections in the near term, the fundamentals of domestic industries remain the core strength supporting long-term development. Institutional investors advise that market participants should remain rational and prudent in the face of volatility, closely monitor the defensive strength at the half-year moving average and the whole-number threshold, and simultaneously focus on this week's Fed rate decision and the earnings scorecards of heavyweight tech stocks. Until international variables are completely clarified, managing cash levels appropriately and avoiding excessive chasing of highs and selling of lows remain the best strategies for navigating the current volatile market.

(Source Fact: Central News Agency)