Taiwan stocks heads for correction

Taiwan’s stock benchmark is on the verge of entering into a technical correction as the global selloff in artificial intelligence stocks deepens.

The Taiex Index fell as much as 3.5% on Friday to its lowest level since August 25. The gauge has dropped more than 10% from its record high hit on October 6, as investors worry about higher borrowing costs, massive AI spending and some weaker-than-expected earnings.

The selloff shows how deep the angst around the AI trade has become. Taiwan, with its broader technology supply chain, is seen by many investors as a higher-quality way to play the theme than South Korea. Even that distinction hasn’t spared the Taiex from nearing a correction. Another round of disappointing earnings in the US overnight accelerated the rotation out of AI stocks and into havens such as Treasuries.

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“The selloff in Taiwan has mostly been sentiment-driven due to global moves in AI stocks,” said Vey-Sern Ling, a managing director at Union Bancaire Privee. “While fundamentals for Taiwan have been improving, don’t stand in front of a stampeding herd even if it’s going the wrong way.”

Hyperscalers’ continued commitment to capex plans and companies’ improving bottom-up visibility have strengthened the case for owning Taiwan, he said.

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Taiwan Semiconductor Manufacturing Co and Delta Electronics Inc. contributed the most to the decline in Taiex Friday, falling as much as 2.3% and 9.8%, respectively. MediaTek dropped 5.9%.

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