The Taiwan stock market experienced its worst one-day decline in history on Monday, plunging 8.4% as fears over the U.S. economy and the broader tech sector sparked a massive sell-off. The Taiex, Taiwan's weighted index, shed 1,807.21 points to close at 19,830.88, marking its lowest level since April 23. This dramatic fall was led by a significant drop in technology stocks, particularly Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest contract chipmaker.
The sell-off was part of a broader market rout across Asia, triggered by concerns over a potential U.S. recession following weaker-than-expected U.S. jobs data and disappointing earnings reports from major technology firms. The uncertainty pushed investors to seek refuge from risk assets, compounding the decline in stock prices.
David Wu, an analyst with Cathay Futures Consulting Department in Taipei, expressed uncertainty about the market's immediate future, stating, "It is difficult to predict when the decline will stop. It's too early to tell."
In an effort to stabilize the market, Lih-Chung Chien, President of the Taiwan Stock Exchange, announced that the bourse would collaborate with regulators to maintain stability. "Exactly when to implement stability measures depends on market conditions, and we're awaiting instructions from regulators," Chien told reporters.
TSMC, which had seen a surge in its stock price over the past year due to high demand for chips used in artificial intelligence, saw its share price plummet 9.75% to T$815, near the daily limit of 10%. Despite market speculation about possible delays in the delivery of Nvidia's new GB 200 chips, some analysts maintain that the fundamentals of TSMC remain strong.
Other major tech stocks also suffered significant losses. Mediatek fell by 9%, while Quanta and Foxconn both dropped close to 10%, hitting the daily allowable limit. Allen Huang, Vice President at Mega International Investment Services, predicted that the decline would continue over the next two days, targeting technical support levels of 19,200-19,300 points.
Of the nearly 1,900 listed companies on Taiwan's main bourse and the smaller OTC exchange, almost 800 had fallen by the maximum permissible amount. This widespread sell-off underscores the extent of investor anxiety.
Earlier in the day, Taiwan's Minister of Economic Affairs, J.W. Kuo, warned investors to brace for a possible market crash, further fueling concerns.
The market turmoil in Taiwan mirrored trends across other Asian markets, which were also affected by the negative sentiment from Wall Street. Major U.S. tech firms like Amazon and Microsoft saw significant losses, driven by worries that the recent AI-fueled rally may have been overdone.
The Taiex's dramatic fall reflects broader concerns about the tech sector's valuations. TSMC, which controls more than half of the world's output of silicon wafers, is a critical player in the global tech ecosystem, supplying major clients such as Apple, Nvidia, and AMD. These companies are seen as central to the current explosion of generative AI products following the success of ChatGPT.
Despite the recent turmoil, TSMC had reported strong financial results, with profits jumping more than a third in the second quarter of 2024 and revenues rising 32% year-on-year to $20.82 billion. The company had also forecast third-quarter revenues of $23.2 billion, exceeding market expectations.
