On Thursday (June 30), the Taiwan Weighted Index dropped 93.21 points at the opening and opened at 15,146.92 points.
After that, the decline continued to expand, falling by nearly 300 points, breaking the 15,000 mark and reaching a low of 14,833 points. 18-month low since January 2021. Weight stocks TSMC fell 6 yuan to touch 480.5 yuan, MediaTek fell 9 yuan to touch 652 yuan, and shipping Sanxiong Evergreen, Wanhai and Yangming all fell by more than 1%.
Taiwan’s weighted index accelerated to sell, breaking 15,000, why is this? USD/Taiwan Dollar Future Trend
It is worth noting that the total revenue of TSMC, Dalian University, ASE, MediaTek, and Wenye Technology in 2021 will exceed $10 billion, and the total revenue of the five companies will total $131.441 billion, accounting for the total revenue of the top 100 companies. The proportion is as high as 55.63%.
Among them, TSMC topped the list with a total revenue of more than 50 billion US dollars, an increase of 18.53% year-on-year. In fact, TSMC is at the top of the global semiconductor industry chain, and its performance growth in the first four months of 2022 is very strong, with an average growth of more than 40%. Mainly due to the continued strong demand for automotive chips, industrial automation, and high-performance computing (HPC), TSMC has continued to raise prices. Regardless of the process and the size of the customer, the price will be increased by 6%.
Taiwan’s weighted index accelerated to sell, breaking 15,000, why is this? USD/Taiwan Dollar Future Trend
However, TSMC has continued to fall since hitting a high of US$688 on January 17, with a cumulative decline of 30%, and the latest market value is US$433.8 billion. It is worth mentioning that TSMC’s market value accounts for 28.0% of the broader market, which means that whether TSMC can stop the decline in the Taiwan Weighted Index still depends on TSMC’s “face”.
Unfortunately, on Monday (June 27), the economic authority of the Taiwan authorities held an electricity price rate review meeting on the afternoon of the 27th, and decided to increase the electricity price by 15% for large industrial electricity consumers. The average price of high-voltage electricity will increase from NT$2.699/kWh to 3.1039 yuan/kWh, and UHV power will increase from 2.2354 yuan/kWh to 2.5707 yuan/kWh. According to reports, international energy prices have continued to rise this year, which has greatly increased TSMC‘s power generation costs and faced great financial pressure. It is estimated that the loss in the first five months will reach 70 billion yuan.
The rise in electricity prices is undoubtedly a big negative for the technology and manufacturing industries. Taking TSMC as an example, the annual electricity bill will increase by 4 to 5 billion yuan, and the production cost will increase, which is equivalent to diluting the earnings per share. Taiwan’s overall exports are 60.15%.
In addition, Goldman Sachs released a report earlier showing that with fluctuations in terminal demand, TSMC’s 8-inch and 12-inch fab capacity utilization rates will drop to 89% and 91%, respectively, next year. However, Goldman Sachs is still optimistic that TSMC can raise prices, and it is expected that TSMC can still maintain a growth rate of 14.2% in 2023.
The author believes that since TSMC’s market value accounts for 28.0% of the broader market, the continued decline of TSMC will undoubtedly further drag down the Taiwan Weighted Index. Of course, the weakening of Taiwan stocks is more affected by the fact that foreign capitals choose to flee emerging markets when major central banks such as the Federal Reserve aggressively raise interest rates and shrink their balance sheets. In addition, the Central Bank of Taiwan followed the Fed in June to raise the benchmark rediscount rate from 1.375% to 1.5% by 12.5 basis points, and lowered its GDP growth forecast for 2022 from 4.05% to 3.75%.
According to data, the top three markets with the largest capital outflows in the week of June 13 were Taiwan, India, and South Korea, with amounts of US$3.7 billion, US$1.84 billion and US$1.09 billion respectively. As of June 23, foreign investors have oversold Taiwan stocks by a net NT$910.7 billion this year, about twice the amount for the whole of last year.
However, the author reminds that the current lowest price-earnings ratio of Taiwan stocks is almost 2 times the standard deviation of the 5-year average, reaching 11.3 times, which is at a relatively low point. Once inflation declines significantly in the future, and the Fed’s aggressive interest rate hike expectations slow down, foreign capital may return to electronic stocks. At that time, Taiwan stocks can be deployed while the price-earnings ratio falls to a long-term low position.
