Foreign funds snapped a two-month selling streak of Taiwanese equities last month amid renewed optimism around artificial intelligence (AI).
Overseas investors bought US$2.7 billion of Taiwanese shares, according to Bloomberg-compiled data.
That is a turnaround from when they sold stocks in March and April as Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) cautioned over persistent weakness in consumer markets and funds rotated to rival South Korea.
Photo: CNA
Sentiment in chip stocks has recovered globally following another bullish forecast from AI chipmaker Nvidia Corp. Taiwan’s dominant position in the AI value chain would get another boost this week as tech giants gather for the nation’s annual electronics showcase event, Computex Taipei.
“Alongside Nvidia’s optimism, there was some cautious positioning on Taiwan earlier in the year which has eased,” Bloomberg Intelligence strategist Marvin Chen said. “While valuations are getting stretched, Taiwan is still Asia’s best proxy for the AI boom.”
Taiwan was the biggest recipient of foreign inflows last month among emerging Asian countries excluding China. That helped fuel a rally in TAIEX to a record high late last month and pushed the benchmark index to become one of the best performers in Asia this year.
Yesterday, the TAIEX moved sharply higher amid enthusiasm over AI development after a speech by Nvidia CEO Jensen Huang (黃仁勳) in Taipei a day earlier. The index closed up 362.54 points, or 1.71 percent, at 21,536.76.
TSMC, which is believed to provide advanced chips for Nvidia’s graphics processing units, led the gains throughout the session and closed 3.05 percent higher at NT$846.
Turnover on the main board totaled NT$433.32 billion (US$13.38 billion) yesterday, with foreign institutional investors buying a net NT$2.9 billion in shares, Taiwan Stock Exchange data showed.
There is still scope for global funds to keep buying given that foreign ownership of TSMC — the largest stock on the index with a weighting of 32 percent — is below the record 80 percent level seen in 2017.
A strong earnings outlook for Taiwanese firms also bodes well for foreign flows into the market. The 12-month forward profit estimate for the TAIEX has risen by more than 8 percent this year compared with little change on the MSCI Asia Pacific Index, data compiled by Bloomberg showed.
A delay in the US Federal Reserve’s rate cuts might still dent the tech rally, while any escalation in cross-strait tensions might deter foreign interest in Taiwan’s stock market.
“Strength of Nvidia and the underlying AI/server theme continue to support associated stocks in Taiwan,” Robeco Hong Kong Ltd Asia Pacific equities head Joshua Crabb said.
Stocks also remain attractive to foreign investors as they “are a lot cheaper than US counterparts,” he added.
Additional reporting by CNA
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