Taiwan’s Market Faces a Test as the National Stabilization Fund Steps In

Table of Contents

• You might want to know
• Market pressures and potential support
• Key Insights Table
• Afterwards...

You might want to know

• Can Taiwan’s National Stabilization Fund help establish a market floor after a historic selloff?
• How could foreign withdrawals, margin balances, and uncertainty about AI development influence the market’s next move?

Market pressures and potential support

Taiwan’s stock market endured what the source describes as one of its darkest Fridays, capping a week in which the benchmark fell by 5510 points, or 12%, and dropped below the 40000-point threshold. The scale of the decline intensified concern about whether the market could find support at lower levels. A rebound in the Philadelphia Semiconductor Index on the previous Friday, together with a 6% rise in Taiwan Semiconductor Manufacturing Company’s American depositary receipts (TSMC ADRs), offered a reason for cautious optimism. Investors were therefore looking for signs that Taiwan equities might stabilize, even as the market faced substantial selling pressure.

The coming week was expected to bring a direct test between the National Stabilization Fund’s planned intervention and continuing foreign investor selling. Domestic margin positions were another concern. Market professionals saw the possibility of forming a durable base above the annual moving average as a relatively favorable outcome, but the immediate outlook remained uncertain. The balance between official support and ongoing withdrawals would be central to whether the market could stop falling and begin to consolidate.

Foreign investors sold a net NT$524.4 billion in Taiwan’s central market during the previous week. Their net short position in index futures reached 99930 contracts. At the same time, the New Taiwan dollar at one point weakened beyond the significant NT$33 level. Taken together, these developments did not yet show a clear signal that foreign investors had stopped withdrawing heavily from Taiwan equities. The combination of stock selling, futures positioning, and currency weakness made it difficult to conclude that the pressure had run its course.

The ten securities with the largest foreign net selling by share volume over the week were mostly exchange-traded funds (ETFs). In order, they were Active CTBC Taiwan Dividend (主動中信台灣收益, 00406A-TW), Yuanta Taiwan 50 (元大台灣50, 0050-TW), Active Uni-President Taiwan Growth (主動統一台股增長, 00981A-TW), Active Uni-President Upgrade 50 (主動統一升級50, 00403A-TW), Capital Taiwan Select High Dividend (群益台灣精選高息, 00919-TW), Active Capital Technology Innovation (主動群益科技創新, 00992A-TW), Powerchip Semiconductor Manufacturing Corporation (力積電, 6770-TW), Taiwan Semiconductor Manufacturing Company (台積電, 2330-TW), Active Cathay Momentum High Dividend (主動國泰動能高息, 00400A-TW), and CTBC Taiwan-Japan-Korea PCB (中信台日韓PCB, 009828-TW). The presence of several ETFs among the most heavily sold securities suggests that the selling affected broad market exposure as well as individual companies.

Measured by value, Taiwan Semiconductor Manufacturing Company faced the largest foreign withdrawal: NT$181.9 billion over the week. MediaTek (聯發科, 2454-TW) followed, with nearly NT$70 billion in net selling. Yuanta Taiwan 50 saw NT$34 billion in withdrawals, while ASE Technology Holding (日月光投控, 3711-TW) recorded NT$27.7 billion. Unimicron (欣興, 3037-TW) faced NT$16.7 billion in selling, and Nanya Technology (南亞, 1303-TW) saw more than NT$15 billion. Delta Electronics (台達電, 2308-TW) also recorded NT$14 billion in net foreign selling. These figures highlight the breadth of pressure across major technology, semiconductor, and market-tracking investments.

Domestic investors were not entirely insulated from the strain. A Taiwan market trader cautioned that local demand also faced headwinds. Although domestic investment trusts were supporting share prices, investors still needed to account for a margin balance of NT$534.1 billion held by mid-sized investors, leading market participants, and retail traders. A large outstanding margin balance can amplify volatility: attempted rebounds may encounter selling, while further declines can trigger forced liquidations, sometimes called margin calls. Traders therefore warned that the market could face pressure in both directions—limited rebound potential on the way up and additional forced selling if prices fall.

Even so, traders said investors without an urgent need to raise cash did not necessarily have to become excessively pessimistic about the longer-term outlook. The National Stabilization Fund announced that it would enter the market on Monday, marking the tenth intervention of its kind in Taiwan’s market history. According to the source, eight of the previous nine interventions generated positive returns. That historical record may encourage confidence, but it does not guarantee that the current intervention will produce the same outcome. The fund’s entry is a potential source of support, while the persistence of foreign selling and domestic leverage remains a counterweight.

SinoPac Securities Investment Service (永豐投顧) noted that the recent sharp decline had not yet led to a substantial reduction in margin financing. It also argued that the current selloff had a different underlying context from previous downturns caused by excessive leverage or failed high-risk trading. In this case, the immediate trigger was described as uncertainty over the direction of AI development following a major victory by the U.S. Democratic Party. The resulting concern has contributed to acute market anxiety about a sudden reversal in the outlook for the AI industry. Because the situation was not yet clear, the firm advised investors to wait and observe rather than assume that the market had already reached a turning point.

The firm’s assessment placed particular emphasis on changes in margin positions. In its view, a significant reduction in margin financing would be an important condition for a market reversal. Until that kind of clearing appears, investors may have limited evidence that leveraged positions have been sufficiently reduced. For the current week, SinoPac Securities Investment Service projected an index range of 38000 to 40000 points. This range reflects the uncertainty surrounding market positioning and the prospects for support, rather than a guarantee that trading will remain within those boundaries.

The longer-term view of the AI technology revolution, according to the source, remains unchanged. The concern is instead that short-term investment performance may be affected by valuations and price-to-earnings multiples. In other words, continued belief in AI’s long-term development does not eliminate the possibility of near-term volatility as investors reassess how much they are willing to pay for companies exposed to the theme. This distinction helps explain why sharp selling can occur even when the broader technological outlook has not been abandoned.

Overall, the market’s immediate direction depends on several interacting forces: the National Stabilization Fund’s intervention, the pace of foreign withdrawals, the level of margin financing, and investors’ reassessment of AI-related valuations. The previous week’s decline was severe, but the available evidence did not establish that selling had ended or that a lasting bottom had formed. A base above the annual moving average was viewed as a favorable possibility, while the near-term index outlook remained centered on the stated 38000-to-40000-point range. Investors and observers would need to watch for clearer changes in positioning and market behavior before drawing stronger conclusions.

Key Insights Table

Afterwards...

The weeks ahead will show whether official support can offset foreign selling and whether margin positions decline enough to ease forced-liquidation risks. A clearer reduction in leverage, improved market stability, or a change in foreign flows could help investors assess whether a durable base is taking shape. At the same time, uncertainty about AI-related valuations may continue to influence short-term trading even if the long-term technology outlook remains intact. The possibility of building a market floor above the annual moving average is therefore conditional, not assured, and depends on how these pressures evolve.