EDITO: The issues facing investors
The TAIEX fell 1,982.04 points, or 11.79%, last month – the biggest single-month loss since September 1990 – amid stubbornly high inflation around the world and looming interest rate hikes. Interest from major central banks has caused global fund outflows from emerging markets and sent others into a tailspin amid fears of a global recession. As signs of US equities falling into bearish territory last month sent ripple effects around the world, including in Taiwan, fears of weakening external demand added to negative sentiment towards the local market due to expectations of macroeconomic headwinds for the export-dependent domestic economy.
So far this year, the TAIEX has fallen 22% from a January high of 18,619 points, meeting Wall Street’s definition of a bear market and meaning that 18,619 is likely the highest the main board will reach this year. Some experts said foreign funds had sold more stocks in tech-heavy markets such as Taiwan, South Korea and India than in other emerging markets in Asia due to fears of a global recession. Unfortunately, the downtrend is likely to continue as long as market sentiment remains cautious in light of aggressive global central bank measures led by the US Federal Reserve to fight inflation.
The significant setback in TAIEX also reflects investors’ cautious outlook on the semiconductor sector in particular, as the performance of the main board of directors is closely linked to the country’s most crucial technology sector. No wonder that in recent sessions, the sell-off in shares of Taiwan Semiconductor Manufacturing Co, which accounts for more than a quarter of TAIEX’s weighting, easily pushed the benchmark to 17,000, 16,000 and then 15,000. points.
The decline in the container shipping sector also added to TAIEX’s losses. Last month, US President Joe Biden signed into law the Ocean Shipping Reform Act as part of efforts to fight inflation. This, coupled with signs that container trade growth is slowing due to the slowing global economy and reduced congestion in seaports around the world due to the easing of COVID-related restrictions. 19, raised fears among investors that the spike in freight costs and the industry’s explosive growth last year could be short-lived.
The PC sector has performed brilliantly since the COVID-19 outbreak due to work from home and remote learning trends. However, after two years of double-digit percentage growth, PC brands and vendors have recently downgraded their sales outlook for the second half of this year, with market visibility looking weak over the next few months. months, as the issue of shortages of semiconductors and key components is gradually resolved. The decline of the PC sector has affected supply chains, including the flat panel displays, power ICs and computer hardware segments.
At a time when funds are flowing out of Taiwan and the stock market is shrinking, investors have had the opportunity to consider the issues associated with the current development of global trade and re-examine their portfolios – whether to load more value stocks or cut growth stocks. . They also paid attention to measures taken by central banks to deal with rising food and energy prices.
Investors swing between optimism and anxiety every day as they hear about the latest developments related to COVID-19, inflation and the macro economy, but what interests them most is whether the world is working. normally and in a balanced way. The current market correction of course deserves great attention, but for investors, the underlying macroeconomic challenges and cyclical changes facing local industries and businesses are even more a matter worth pondering.
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