Taiwan stocks suffer record plunge as foreign investors dump shares amid rising risks

Taiwan stocks suffered a sharp decline this Friday, with the Taiwan Stock Exchange Capitalization Weighted Stock Index plunging 1,655.96 points, marking the sixth-largest single-day point drop in the market's history. Foreign institutional investors recorded a net sell-off of NT$302.555 billion during the trading session, setting a record for the largest single-day net sell amount by foreign capital. Data released by the Taiwan Stock Exchange showed that the margin purchase balance dropped to NT$646.415 billion, a decrease of NT$5.141 billion from the previous trading session, indicating that margin financing demand continues to face downward pressure.

This decline occurred amid widespread global market concerns over the acceleration of the US Federal Reserve's interest rate hike pace. The Federal Reserve announced last month that it would continue to raise its benchmark interest rate to under 5% and hinted at further room for rate hikes in the future, prompting global capital to flow toward safe-haven assets. Since the beginning of the year, Taiwan stocks had exhibited strong gains, driven primarily by leading semiconductor and electronic component stocks, alongside a recovery in Taiwan's export demand. However, slowing global demand and uncertainties in US-China trade relations have elevated investors' risk assessments regarding Taiwanese equities.

The massive sell-off by foreign capital was partly driven by concerns over rising capital costs in the US high-interest-rate environment. Rising US bond yields have triggered capital outflows from emerging markets; meanwhile, although Taiwan's domestic high-tech industry possesses a competitive advantage, it is also affected by global supply chain restructuring and fluctuations in raw material prices. Over the past year, foreign investment proportions in Taiwan stocks have risen significantly, but in recent years, several foreign institutional investors have shifted funds to the United States and other mature markets, reflecting heightened risk aversion.

The contraction of the margin purchase balance also highlights a reduction in market leverage. The margin purchase balance has continued to rise since last year, reaching historical highs, which indicates a relatively high proportion of investors borrowing to buy stocks. Although the reduction of NT$5.141 billion may not seem large in figures, under a high-leverage environment, any capital withdrawal can amplify stock price volatility. If the margin purchase balance continues to decline, market liquidity may be restricted, and the magnitude of short-term stock price adjustments could intensify.

For Taiwanese enterprises, violent fluctuations in stock prices will directly impact their market capitalizations and financing costs. Particularly for semiconductor and electronic component companies, falling stock prices could weaken their fundraising capabilities, impacting future research and development investments and capacity expansion plans. Investors will need to reassess the risk-reward ratio and may shift capital toward more stable assets. Regulatory authorities will also monitor changes in the margin purchase balance and market volatility, and may adjust margin regulations or strengthen information disclosure if necessary to maintain market stability.

This decline is not merely an isolated event, but rather reflects the complex interaction between global capital flows and Taiwan's economic structure. The rapid withdrawal of foreign capital and the contraction of the margin purchase balance serve as a reminder that the market remains in a high-risk environment, requiring investors to cautiously evaluate future trends. If global interest rate trajectories continue to intensify in the future, Taiwan stocks may face even greater challenges. (Source of facts: Central News Agency)