Taiwan Stocks Slump for the Week: TAIEX Loses 5,510 Points (−12.19%) as Foreign Investors Sell NT$524.4B; SOX Rebounds 4.21%, Payrolls Jump 165,000

TAIEX loses 5,510 points this week and falls below 40,000, with a record intraday drop on Nov 6

US chip stocks slumped repeatedly starting last Friday, and Taiwan's market fell on all five days this week, with the TAIEX dropping from 45,211.83 to 39,701.64, down 12.19% for the week. After the SOX fell 12.25% the night before, heavyweights such as TSMC and MediaTek opened at their limit-down prices on Nov 6, and the index fell as much as 3,737.67 points intraday, the biggest intraday point drop on record according to CNA, before closing down 1,873.08 points. Memory, PCB and substrate, and AI power and cooling stocks fell the most, with Unimicron and Nanya Technology each down more than 20% for the week.

Regulator curbs securities-lending short sales and raises short-sale margin from Nov 9

After Taiwan's slump on Nov 6, the Financial Supervisory Commission announced (in Chinese) that from Nov 9: the daily cap on intraday securities-lending short-sale orders will fall from 30% to 3% of average volume over the previous 30 business days (brokers' hedging for warrants, ETF market making and similar needs is exempt); the minimum short-sale margin ratio for listed and OTC stocks will rise from 90% to 130%; and investors may post a wider range of collateral, such as foreign securities held through Taiwanese brokers. The commission also encouraged listed companies to consider share buybacks and hold investor briefings, and urged investors to respond rationally. Premier Cho Jung-tai had told the commission on Nov 6 to watch the market, and the National Stabilization Fund said it does not rule out an extraordinary meeting if declines become disorderly.

Foreign investors sell NT$524.4B in a week; investment trusts buy for a 19th straight day

Foreign investors sold every day this week, a combined NT$524.38B, mostly Taiwan ETFs and 0050; investment trusts bought on all five days, a combined NT$128.82B, and have been net buyers for 19 straight days since Oct 8. Dealers' hedging accounts sold NT$187.65B this week, and the three groups combined sold a net NT$600.42B. Foreign selling also showed up in the currency: the NT dollar weakened this week from 32.57 to 33.11 per US dollar.

October payrolls rise 165,000, far above forecasts

The Bureau of Labor Statistics reported that nonfarm payrolls rose by 165,000 in October, against a forecast of just 59,000 in a Dow Jones survey cited by CNBC; August and September were revised up by a combined 84,000 or so, with September now at 60,000. The unemployment rate fell from 4.2% to 4.1%, and average hourly earnings rose 0.4% from the prior month and 3.1% from a year earlier, both above forecasts. Professional and business services (70,000) and health care (42,000) added the most jobs. However, the average duration of unemployment rose to 27.1 weeks, the longest since September 2021. The strong data raised expectations of a December Fed hike, lifting short-term Treasury yields and the dollar.

Chip stocks rebound but recover only about 30% of the previous day's loss

After the SOX fell 12.25% the day before, bargain hunters stepped in on Nov 6 and the index rose 4.21%: AMD gained 11.04%, Intel 7.71%, Micron 5.12% and Nvidia 2.78%, and chip equipment maker Lam Research rose 8.23% after announcing a $25 billion buyback. But the rebound recovered only about 30% of the previous day's drop, and the SOX still fell 12.15% for the week, its fifth straight weekly loss. The week's main theme: after the US midterm elections, markets worry that Congress and the states may restrict AI data center construction, and valuations of AI chip, memory and server stocks were sharply cut.

Michigan consumer sentiment rises to 51.0 as consumers worry about an AI bubble

The University of Michigan's preliminary November consumer sentiment index rose to 51.0, above October's 48.0 and the forecast of 47.5, though still a low reading. According to reports, more respondents worried about an AI bubble, but the cost of living remained their biggest concern. This week's sharp drop in oil eases consumers' energy costs.

Earnings: Airbnb and Cloudflare jump; DraftKings and Atlassian slump

Companies that reported after the previous close or before Friday's open saw sharply mixed reactions. Airbnb raised its revenue growth forecast and announced a buyback of up to $12 billion, rising 11.67%; Cloudflare's third-quarter revenue grew 39% from a year earlier, and its shares rose 9.91%. Sports betting company DraftKings fell 21.30% after a wider-than-expected loss and a lower profit outlook; software company Atlassian fell 16.15%, and law enforcement technology company Axon fell 18.18% after cutting its full-year outlook.

The common theme in US and Taiwan stocks this week was a reassessment of how fast US AI data centers will be built. Memory and AI chips fell the most in the US, and the corresponding Taiwan industries fell even more: Micron lost 22.01% this week and Nanya Technology 24.42%; substrates, PCBs, power and cooling for US data centers come mainly from Taiwanese suppliers, and Unimicron and Delta Electronics fell 26.49% and 20.97% for the week. TSMC, the largest stock in Taiwan's market, fell 9.92% this week, more than its ADR's 7.56% but less than the TAIEX's 12.19%.

The gap between the two markets was clearest on Friday: Taiwan's Nov 6 close reflected the previous night's US slump but not that night's US chip rebound. TSMC's ADR rose 6.33% on Friday, putting its converted price 16.45% above the Taiwan close, and TAIEX night futures rose 646 points to 40,298. Night futures and the ADR are prices set while Taiwan's market is closed; the actual move in Taiwan's cash market is set by Monday's 1:30 PM Taipei close.

Other links: strong US jobs data and rising Fed hike expectations strengthened the dollar, and the NT dollar weakened past 33 this week, with foreign outflows and the exchange rate affecting each other. Oil fell 13% this week, which relates to product prices for Taiwan's petrochemical industry and fuel costs for airlines and shipping companies.