Index ETF component stock adjustments trigger a chain reaction! The financial holding group performs brilliantly, and newly added stocks see a short-term surge of buying interest.

In December, Taiwan’s stock market saw financial and insurance stocks become the focus. The Financial & Insurance Index rose over 2% during the trading session, reaching a new all-time high of 2412.7 points, with Taiwan Shin Kong Financial (2887), which recently gained eligibility for inclusion in large high-yield ETFs, standing out the most.

Market Effects Triggered by ETF Component Changes

Recently, several Taiwan stock ETFs have adjusted their constituent stocks, involving funds totaling hundreds of billions of NT dollars. The Taiwan High Dividend ETF managed by Yuanta Securities, with assets exceeding 400 billion NT dollars, was newly included in Taiwan Shin Kong Financial, effective from the 16th, with an eight trading day transition period for building positions. Changes in the components of this type of index ETF often accompany large-scale capital inflows, prompting fund managers to preemptively position themselves.

On the 16th, institutional investors bought 136,000 shares of Taiwan Shin Kong Financial in a single day, causing the stock price to rebound significantly and trading volume to break 430,000 shares. The buying momentum continued the next day, with trading volume reaching 490,000 shares before noon, surpassing the previous day’s full-day volume. Ultimately, Taiwan Shin Kong Financial’s stock price once broke through the NT$21 mark, reaching a high of NT$21.60, and closed at NT$21.25, with a daily increase of 5.99%, setting a new record high.

Financial Stocks Rise Collectively, Multiple Records Broken

The strong performance of the financial holding group is not limited to Taiwan Shin Kong Financial. E.SUN Financial rose over 3%, while CTBC Financial and Cathay Financial increased by more than 4%. Among them, Cathay Financial (2882) surged to NT$73.2, reaching a new high since June 2008; Fubon Financial (2881) peaked at NT$97.9 during the session, approaching the NT$100 mark, and setting a new record high. Yuanta Financial and KGI Securities also increased by over 1% to 2%.

Profitability Outlook Turns More Optimistic, but Dividend Capacity Needs Cautious Evaluation

According to institutional statistics, the net profit of financial stocks after tax for November reached NT$59.087 billion, a significant increase of 71% compared to the same period last year. The main drivers include higher capital gains realized by life insurance companies, strong growth in bank net interest income and fee income, and active securities brokerage activities driven by lively stock market trading.

MacroView Investment Advisory pointed out that the cumulative profit of the top ten financial stocks in the first ten months was NT$506.5 billion, a slight decline of over 5% compared to the same period last year. In the first half of the year, asset impairments caused by the appreciation of the New Taiwan Dollar impacted earnings, but in the second half, with the depreciation of the New Taiwan Dollar and rising stock and bond prices, full-year profits are expected to match last year’s levels. As interest rate environments stabilize, the performance of bank net interest margins and life insurance hedging costs are expected to improve, making the profit outlook more optimistic.

However, life insurance companies are required by regulation to set aside 30% of their pre-tax profits for the foreign exchange fluctuation reserve in December, which may lead to increased monthly losses. This poses a potential challenge for financial holdings primarily engaged in life insurance business regarding their ability to distribute cash dividends next year. The market expects the overall dividend payout capacity of financial holding groups in 2026 to be slightly lower than that of 2025.

Market Observation

As the year-end holiday approaches, foreign investors are shifting their strategy toward defensive assets. Financial stocks with relatively low bases and stable dividend expectations have become key targets for capital inflows, continuously pushing related sectors to new highs. Supported by ETF building effects and favorable capital conditions, the financial holding group still has room for short-term performance, but investors should closely monitor changes in buying momentum and potential pressures on earnings from life insurance reserve requirements.