Highlights

As Taiwan's stock market extends gains, external factors like U.S. tariff policies and Q3 tech performance remain key concerns. Notably, volatility in Q3 is anticipated due to geopolitical tensions and predicted corrections in global markets. Investors are advised to stay alert for strategic opportunities emerging during these fluctuations.

Sentiment Analysis

• Investors exhibit uncertainty as tariffs continue to influence market trends.
• There is a cautious optimism regarding potential interest rate cuts.
• Concerns persist about the non-inclusion of Taiwan in the latest U.S. tariff notifications.

Article Text

The Taiwanese stock market saw its third consecutive week of gains, rising by 203.53 points, supported by foreign investment inflows over the same period. However, market experts point out that President Trump's tariff strategies continue to serve as a significant destabilizing influence. The current cycle of adjustments in corporate earnings, alongside substantial previous increases, suggests that heightened volatility is probable in the third quarter. Lingering effects from U.S.-China trade tensions and early freight shipments in the first half of the year also indicate a possible correction phase for Taiwan's stocks. Such a correction could present long-term investors with strategic buying opportunities.

Liao Bingkun, manager of the PGIM Prudential High Growth Fund, notes that the market is experiencing high-level oscillations. Noteworthy developments include Nvidia's market value milestone surpassing $4 trillion, fueling Taiwan's AI supply chain advancements. Additionally, the Federal Reserve's meeting hints at potential interest rate cuts by year-end, further bolstering the market's appeal, propelling indices above all moving averages.

However, recent U.S. tariff notices have not included Taiwan, and semiconductor chip tariffs are pending announcement, keeping short-term tariff concerns prevalent among investors. Liao emphasizes the second phase of Trump's tariff negotiations revealing an array of rates, notably 20%–40% generally, with 25% for Japan and Korea, and up to 30% for Mexico and the EU. Extensions have been granted until August 1st, and market reactions have become more neutral, indicating that the impact may be diminishing.

The Taiwan Institute of Economic Research forecasts that the U.S. will likely impose tariffs between 15% and 20% against Taiwan, considering current exchange rates. Given that 80% of Taiwan's exports to the U.S. are subject to Section 232 investigations, including semiconductors and servers, the outcomes of these negotiations remain crucial. Moreover, recent financial reports from major wafer and optical manufacturers suggest a weaker third quarter for the tech sector under the shadow of early shipping from tariff uncertainties and currency shifts. Companies' presentations this week are expected to offer crucial insights into the industry's outlook for Q3.

Key Insights Table