Taiwan's Taiex Plummets in Worst Decline Since 1967

Record Drop Driven by TSMC and US Economic Fears

Taiwan's benchmark stock index, the Taiex, fell by a historic 8.4% in Taipei, marking its largest drop since 1967. This decline was primarily driven by a 9.8% plunge in Taiwan Semiconductor Manufacturing Co. (TSMC) shares, which also set a record for the company’s daily loss. South Korean tech stocks experienced similar setbacks.

Shift from AI Optimism to Recession Worries

The sharp selloff highlights a shift from earlier optimism surrounding artificial intelligence to growing concerns about a potential US recession and disappointing earnings forecasts from companies like Intel Corp. Export-oriented economies in Taiwan, South Korea, and Japan have been particularly hard hit.

Market Reactions and Trends

Peter Garnry from Saxo Bank notes that the Taiex had been a top performer this year due to strong sentiment around AI and favourable funding conditions. However, as these factors reverse, traders are exiting their positions, resulting in a classic momentum crash.

Investors are moving away from riskier assets and favouring safer investments such as US Treasuries and the Japanese yen. The yen has surged nearly 13% this quarter following a rate hike by the Bank of Japan, leading to a broader selloff of assets financed by cheap yen.

Declines in Other Markets

Japan’s stock indices, including the Topix and Nikkei 225, have dropped more than 12% and entered bear markets. In South Korea, the Kospi Index fell by over 9%, marking its worst performance since 2001.

Taiwanese Finance Ministry's Response

The Taiwanese Finance Ministry, which oversees financial stabilization funds, has stated it will closely monitor both domestic and international market developments. TSMC, a major component of the Taiex, accounts for over 30% of the index.