## Fed Rate Cut Countdown Sparks Asian Rotation, Taiwan Stocks Jump Over 28K with Risks and Opportunities

**Capital Reallocates to Asian Financial Stocks, Taiwan Stock Market Performs Strongly Today**

As the Federal Reserve (Fed) continues to raise expectations for a December rate cut (probability reaching 96%), a new wave of capital rotation has swept through Asian stock markets. Taiwan stocks have performed the best in this wave, with the TAIEX index rising 322.89 points, closing at 28,303.78 points, up 1.15%. Trading volume expanded to NT$424.744 billion, successfully breaking the 28,000-point threshold. Behind this rally, three major institutional investors collectively increased their holdings—foreign investors, investment trusts, and dealers—adding a total of NT$19.117 billion, hitting a recent single-day high, with foreign investors leading with NT$14.088 billion.

**Global Tech Stocks Take Profits, Funds Shift Southward in Search of Value**

This shift in Asian capital flow stems from a key move: international funds withdrawing from high-valuation US AI tech stocks and moving into undervalued financial and consumer sectors. The US dollar index retreated to 102.5, further fueling this trend. This week, net foreign inflows into Asian markets exceeded US$15 billion, with India and Vietnam each attracting US$2 billion, benefiting from 6-7% GDP growth and the effects of global supply chain shifts. The Nikkei 225 rose 1.2% to 39,800 points, South Korea’s KOSPI increased 0.8% to 2,650 points, China’s Shanghai Composite gained 0.3% to 3,150 points, and India’s Nifty 50 rose 0.9% to 24,200 points—showing a broad pattern of gains with fewer declines across Asia.

In Japan, bank stocks led the rally with a 2.5% increase, reflecting foreign investment focus on low-yield financial stocks with yields above 5%. Chinese manufacturing giants like CATL rose 1.1%, benefiting from signs of a recovery in consumer demand. OECD forecasts that by 2025, Asian capital inflows will reach US$50 billion, with undervalued financial stocks becoming key targets for international funds.

**Intense Internal Rotation in Taiwan Stocks, Tech and Traditional Sectors Lead**

Driven by institutional buying, Taiwan stocks have seen clear sector switching. The semiconductor index surged 2.31%, with five stocks—Wanghong, Macronix, VSE, Siliconware, and Huadong—hitting daily limit-ups. Nanya Technology rose 6.86% to NT$163.5, benefiting from a 15% increase in DRAM and NAND prices and inventory replenishment demand. The glass sector also performed well, rising 4.22%, with Taiwan Glass up 4.8% to NT$38.2 and Fuhua Technology up 7.73%. PCB concept stocks continued their hot streak, with Unimicron up 4.8%, reflecting strong AI server orders and a global electronics supply chain recovery.

In large-cap stocks, TSMC rose 2.4% to NT$1,495 (up NT$35), contributing over 200 points to the index; Hon Hai and MediaTek increased 0.43% and 1.05%, respectively. Financial stocks gained 0.28%, with Fubon Financial and Taishin Financial rising over 2%, benefiting from the NT dollar appreciating to NT$31.25, reducing foreign exchange costs.

**Institutional Buying and Selling Details: Different Strategies Target Different Opportunities**

Foreign investors bought NT$14.088 billion, mainly focusing on large-cap stocks and memory chips. TSMC was net bought for 10,500 lots, Hon Hai for 5,200 lots, and Nanya Technology for 2,500 lots—continuing a four-day buying streak. This week, foreign net inflows have totaled NT$36.8 billion. Investment trusts turned net buyers for NT$1.029 billion, mainly targeting financial stocks like Fubon Financial (3,801 lots), deliberately avoiding high-priced tech stocks. Dealers bought NT$4 billion, mainly in memory and PCB sectors, with Winbond (1,800 lots) and Unimicron (1,740 lots) as key targets. The eight major state-owned banks sold NT$2 billion, indicating that bullish sentiment remains intact.

PGIM Prudential analyst Liao Bing-kwan cited historical data showing that after an average decline of 2.15% in November, December typically gains 4-6%. With Taiwan’s market cap at NT$82.5 trillion and trading volume possibly rebounding to NT$450 billion, the outlook remains optimistic.

**Short-term Overheating Signals Emerge, TWSE Names 15 Stocks for Attention**

Despite the bullish atmosphere, regulators have issued warnings. The Taiwan Stock Exchange announced a list of 15 stocks to watch, including Nanya Technology, Macronix, Unimicron, Taiwan Glass, Powerchip, Wistron, Inventec, Innolux, Taishin Financial, Wente, Nanya Circuit, Evergreen Marine, MediaTek, Hon Hai, and TSMC. Many are in semiconductor, PCB, glass, and transportation sectors. These stocks share common features: recent large gains, abnormal trading activity, and high off-inventory rates of 30-50%, indicating potential manipulation and short-term shorting risks.

Nanya Technology rose 6.86% but had a 45% off-inventory rate; Macronix hit the daily limit-up but also showed signs of overheating. These signals point to technical concerns about overextension.

**Technical and Risk Warnings: Stay Cautious Amid Optimism**

Fubon Securities Chairman Chen Yiguang analyzed that the current RSI of Taiwan stocks has risen to 68, indicating a bullish zone. Support is at 28,000 points, with resistance at 28,500 points. If core PCE data after the Fed meeting exceeds expectations, profit-taking could trigger a correction. While year-end seasonal effects support the market, they may also tempt retail investors to chase highs.

Moore Securities analyst Hsieh Wen-en warned of potential risks similar to the August 2024 limit-down event in Taiwan index futures. He advises investors to reduce holdings on rallies, focus on fundamentally stable financial and large-cap stocks like Fubon Financial and TSMC, set stop-losses within 5%, and diversify holdings to hedge against Fed meeting uncertainties.

**Outlook: Balancing Optimism and Caution**

This rebound in Taiwan stocks not only reflects the extension of Fed policy expectations but also signifies the strategic importance of Asian markets in global capital reallocation. The shift of foreign funds from overvalued US regions into undervalued Asian financial and consumer sectors has become a key theme for the near future. However, signs of short-term overheating, concentrated attention stocks, and high off-inventory rates serve as reminders for investors to stay vigilant. Monitoring Fed meeting outcomes and core PCE data closely will be crucial to seize year-end opportunities while avoiding potential pullbacks.