Preface

The recent surge of Taiwan's stock market to all-time highs has generated noteworthy fluctuations, captivating investors' focus on the continuity of financial momentum and the support of underlying fundamentals. According to Liang En-Yi, manager of the Cathay Taiwan Dividend Growth Fund, the market highs should not be seen as any bubble formation. He emphasizes the entry into a phase of capital influx, with expectations of an inventory replenishment surge in consumer electronics by mid-next year, boosted by diminishing tariff impacts, which are poised to revitalize purchasing power.

Lazy bag

Taiwan’s stock rise isn't a bubble growth but an outcome of corrective policy measures. Reduced tariffs and returning capital signify strong future potential for growth, especially in consumption-driven sectors.

Main Body

Taiwan's stock market has recently achieved historic highs, reflecting a consistent upward trend that underscores the resilience of its sectors despite external pressures. This event marks a notable shift as investors closely watch market dynamics going into the fourth quarter and early 2026.

Investment managers, like Cathay Taiwan’s Liang En-Yi, ascribe this trend not to speculative bubbles but to structural adjustments following policy relaxations. The precedent set by U.S. indices, which benefitted from focused funding and economic stimulus including acts like the "American Greatness Act", further elaborates on how strategic regulatory shifts can drive up markets.

The impact of global policies is crucial to this interpretation. The U.S. has introduced several initiatives that bolster market confidence, such as stabilizing cryptocurrency regulations and potential interest rate cuts by key financial authorities. These create a fertile ground for financial growth that ripples across global markets.

For Taiwan, the rollback of aggressive tariff measures, especially those instituted during the previous U.S. administration, has been pivotal. The early reactions to these policy changes pushed Taiwan towards clearing out its stock excesses from April, setting up a leaner and more efficient financial base.

Looking forward, Liang En-Yi outlines several forces shaping the money market scene. A foreseeable reduction in U.S. interest rates may re-attract foreign capital to Taiwan's stocks. In tandem, domestic capital may pivot through currency exchanges, and businesses might gradually redirect funds from property to equities under local regulatory influences.

Moreover, the first half of 2026 is set to be pivotal. As these economic elements coalesce, the U.S. consumer market stands to release pent-up spending. Reduced tariff hesitancy among consumers will likely lead to replenished inventories, catalyzing demand across essential commodities including AI technology, apparel, and other electronics.

The Cathay Taiwan High Dividend Fund adeptly navigates this landscape, leveraging strong, stable dividend-paying stocks with significant resilience against market turns. Active management and tactical industry selection ensure investors remain positioned for growth, focusing on electronics, semiconductors, and diversified electronics from brands like TSMC and MediaTek.

Key Insights Table