Taiwan Falls 5.69% in a Month Under Pressure from Technology and AI

Key Facts

The Taiwan Index Company’s page showed the TAIEX’s cumulative return for the month at -5.69%, based on the reading displayed on October 30. In the same session, the index fell 2.49% and closed at 45,211.83 points, after ending the October 29 session at 46,368.33 points, according to EL7 data. Taiwan’s Central News Agency said the index lost 1,156.50 points that day and trading value reached NT$877.73 billion. The monthly return figure confirms the index’s decline over the recent period, but does not prove that October was the worst October in its history. The daily drop came amid falling technology shares and renewed questions about returns on heavy spending on artificial intelligence.

Pressure extended to other Asian markets on October 30: the MSCI Asia emerging-markets equity index fell 1.6%, while South Korea’s Kospi dropped 3.5% and Taiwan’s index fell 2.5%, according to a Reuters report published by The Edge Malaysia. Shares declined after disappointing results from major technology companies accelerated a shift away from AI-related positions. The report said investors were scrutinizing companies’ ability to continue funding AI plans at high spending levels. In Taiwan, the electronics index fell 2.90% on October 30, after the Nasdaq dropped 1.38% in the previous session, according to Taiwan’s Central News Agency. The electronics sector’s performance indicates that pressure in the Taiwanese session was concentrated more in technology stocks than in the broader index.

TSMC shares were among the main sources of pressure on the index in the final session of the month. Taiwan’s Central News Agency said the company represents more than 40% of total market capitalization and its shares fell 1.86% to NT$2,370, contributing about 360 points to the TAIEX’s loss. That contribution illustrates the company’s large weight in the index’s movements, without by itself explaining the monthly return of -5.69%. Foreign institutional investors also made net equity sales worth NT$112.47 billion in the market on October 30, according to Taiwan Stock Exchange data cited by the agency. Foreign selling coincided with the sharp decline, while the broader explanation for the month’s performance remained tied to a mix of technology pressures and assessments of AI spending.

Data cited by Taiwan’s Central News Agency from a central bank report showed that foreign institutions’ net stock sales reached NT$1.25 trillion between July and October 21, equivalent to about US$38.7 billion. Net capital outflows during the period were about US$54.3 billion, including capital gains and cash dividends, according to the central bank. The central bank attributed the pressure to renewed concerns about a military conflict between the United States and Iran, alongside a global sell-off in technology shares amid worries about AI spending. In the week before a report published on October 20, foreign investors sold US$19.4 billion of Taiwanese shares and transferred a net US$17.961 billion overseas. These figures show that selling extended to capital flows during the period, alongside falling share prices.

The latest drop followed clear swings in the index during the month. On October 13, the TAIEX lost about 1.95%, and foreign institutional investors made net sales of NT$165.34 billion, the third-largest net sale on record at the time, according to Taiwan’s Central News Agency. On October 20, the index fell 1.13%, and analyst Adam Lin said foreign institutions’ short futures positions exceeded their long positions by about 92,000 contracts. The agency quoted Lin as saying investors had reduced their holdings amid fears of further foreign selling and fund transfers abroad as the U.S. dollar strengthened. By contrast, the TAIEX rose 2.04% on October 28 to 47,035.58 points, after the Philadelphia Semiconductor Index climbed 3.60% the previous night. These moves reflect variation within the month and do not make the monthly decline a continuous slide.

Taiwan’s central bank had said on October 20 that the Philadelphia Semiconductor Index fell 15.7% between October 7 and 16, compared with a 5.4% decline in the TAIEX over the same period. This provides a comparison between semiconductor shares and the Taiwanese market during part of the month, but on its own is insufficient to attribute the entire monthly return to the chip sector. More broadly, the technology-heavy Nasdaq lost more than 1% overnight before the Reuters report, after Google’s parent company’s shares fell following weak results and a sharp increase in spending. AI shares had been volatile on October 27, when the TAIEX rose 0.5% amid concerns about the cost of borrowing to fund data centers and buy AI chips. That day, the Associated Press said Alphabet and Microsoft would report quarterly results on Wednesday, followed by Amazon on Thursday.