Stock market regulators and local businesses should exercise extreme caution amid volatilities in global markets and economies, as Taiwan’s economy and stock market can easily be affected by events occurring abroad due to its small scale. On top of that, noneconomic factors such as escalating geopolitical tensions, wars in the Middle East and Russia’s invasion of Ukraine could quickly pose major threats to Taiwan’s stock market. Regulators should draw a clear baseline and prepare countermeasures to face such situations, while local businesses should be on alert for fast-changing external factors.
The TAIEX on Monday was hit hard by a US stock market rout, along with most Asian markets. The index nosedived to close below 20,000 points for the first time since April 25, as fears of a faltering US economy and a potential artificial intelligence (AI) bubble burst triggered selloffs. Technology stocks bore the brunt of the chaos. The TAIEX fell 8.35 percent, or 1,807.21 points, the steepest drop in its history, to close at 19,830.88 points, after US markets sank on Friday.
The Dow Jones Industrial Average on Friday fell 1.51 percent, while the S&P 500 dropped 1.84 percent, as a worse-than-expected contraction in manufacturing activity last month and cooled job data raised concerns that the US economy might dip into recession. The US only added 114,000 new nonfarm jobs last month, down sharply from 179,000 the previous month.
Additionally, shares of AI chip supplier Nvidia Corp on Friday fell 1.8 percent after the technology-focused news Web site The Information reported that the company would delay shipments of its next-generation Blackwell B200 AI chips by about three months due to design flaws, slamming the brakes on the burgeoning AI industry.
That precipitated dramatic ripple effects that shook the stock prices of Nvidia’s local partners, including Taiwan Semiconductor Manufacturing Co (TSMC), its sole chip supplier, and AI server assemblers Quanta Computer Inc and Wiwynn Corp. TSMC stock on Monday plunged 9.75 percent to NT$815, while Quanta and Wiwynn shares fell 9.96 percent and 9.82 percent to NT$239.5 and NT$1,790 respectively.
“People should be well prepared as [stock routs] are part of the world economic cycle,” Minister of Economic Affairs J.W. Kuo (郭智輝) said. He did not elaborate on what investors should do to prepare for volatilities in world markets.
The Taiwan Stock Exchange on Monday held an emergency news conference in an attempt to boost investor confidence. Local companies have built healthy fundamentals, with all listed companies registering 10 percent annual revenue growth in the first half of this year, the stock exchange said. It did not unveil any countermeasures, such as tightening the permitted range of stock movements, to prop up the market. It only said it is closely monitoring the effects of shifts in global stock markets on the TAIEX, as the selloffs were not triggered by non-economic factors.
Regulators, including the Taiwan Stock Exchange and the Financial Supervisory Commission, should be on high alert to external risks, given heightened geopolitical tensions, uncertainty about the US presidential elections and the US Federal Reserve’s stance on key interest rates, and the complexity of global financial situations. As those factors cannot be controlled, well-planned countermeasures and a clear baseline are needed to avert a crisis.
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