Asian markets fell in the wake of the U.S. market, and Taiwan is on the verge of a correction. Is it worth buying?
Although shares of Taiwanese companies, led by TSMC, have become more attractive, the Swiss bank Union Bancaire Privée believes it is best not to try to fight the sell-off at this time
The Taiwanese stock market nearly entered a correction during the last trading session of October following an accelerated sell-off in the U.S. technology sector / Noah Sauve / Shutterstock.com
Shares of Asian tech companies plummeted on October 30, following the lead of U.S. tech giants, after Amazon and Intel released quarterly earnings reports that disappointed the market, heightening concerns about demand for semiconductors and the return on investment in AI.
South Korea’s Kospi index, considered a barometer of AI-driven trading, plummeted 3.5%, while Japan’s Nikkei 225 fell 2.1%. During the trading session, their declines reached 5% and 3%, respectively. The Bloomberg index, which tracks the stocks of Asian chipmakers, lost as much as 4.8%.
On Thursday, Alphabet’s stock fell 12.6% during the regular trading session in New York—investors were spooked by the fact that Google’s parent company had turned negative in terms of cash flow due to massive AI spending. The sell-off continued on the Nasdaq after-hours market early Friday morning: Intel shares lost 23%, and Amazon shares fell 7%. Like Alphabet, both companies are burning through cash quickly, Reuters notes.
Investors were also spooked by Intel’s forecast for the personal computer market: the company estimates that it will shrink by 10% next year, following a 12% decline in 2026. This put pressure on the shares of Asian PC manufacturers: Lenovo and Asustek Computer shares fell by more than 7%.
Taiwan Is Being Sold on the Back of Emotions
Taiwan’s stock market was on the verge of a technical correction on Friday: the local Taiex index fell more than 10% from its October 6 record high, but recovered a small portion of its losses by the close, according to Bloomberg. Shares of TSMC, the world’s largest custom chipmaker and Taiwan’s most valuable company, fell 1.9% by the end of the day. Shares of power supply manufacturer Delta Electronics plummeted 9.8%, while shares of smartphone processor developer MediaTek closed down 3.2%, having fallen as much as 5.9% during the trading session.
Wei-Sern Ling, Managing Director of the Swiss private bank Union Bancaire Privée, attributes the sell-off in Taiwan primarily to investor sentiment, as investors react to the global decline in AI-related stocks. According to him, the case for investing in Taiwanese stocks has grown stronger: the largest cloud computing companies are not abandoning their capital expenditure plans, and the outlook for Taiwanese businesses is becoming clearer.
Nevertheless, Ling urged caution: “Although Taiwan’s fundamentals are improving, you shouldn’t stand in the way of a charging herd, even if it’s running in the wrong direction,” Bloomberg quoted him as saying.
Demand has shifted toward government bonds
Meanwhile, bonds may end October with their strongest gain in nearly three years: investors are shifting into bonds from stocks, fearing that tech giants’ rising AI spending will not yield sufficient returns. The yield on benchmark U.S. debt—10-year Treasuries—fell by more than 7 basis points to 4.91% during trading in Tokyo. Since the beginning of the month, it has fallen by 37 basis points, a decline not seen since December 2023, according to Reuters.
This article was AI-translated and verified by a human editor
