Three major institutions aggressively bought 19.1 billion yuan on the eve of Fed rate cuts; Taiwan stocks stay above 28K but short-term undercurrents are surging

Taiwan stocks, under the catalyst of the Federal Reserve’s (Fed) December rate cut probability approaching 96%, today staged a capital rotation spectacle. The three major institutional investors bought a net of NT$19.117 billion in a single day, hitting a recent high, with the weighted index soaring 322.89 points to 28,303.78, closing up 1.15%, and trading volume surging to NT$424.744 billion.

However, behind the rally lurks risks — the stock exchange also pointed out 15 stocks to watch, with many stocks’ cancellation ratios reaching 30-50%. Simply put, cancellation refers to the rapid hedging of buy and sell orders, reflecting aggressive trading behaviors of retail investors and major players. These high-cancellation stocks imply heavy control by major players and obvious short-term short squeeze risks.

Foreign capital flows in massively, Asia becomes a safe haven for funds

The core driver behind the rise in Taiwan stocks comes from large-scale capital rotation in Asia. This week, foreign net inflows exceeded US$15 billion, mainly due to the weakening of the US dollar (DXY fell to 102.5) and dovish expectations for the Fed. Funds are strategically withdrawing from overvalued US tech stocks and shifting toward Asian financial and value stocks.

The Nikkei 225 rose 1.2% to 39,800 points, Korea’s KOSPI increased 0.8% to 2,650 points, and India and Vietnam each attracted US$2 billion in funds, benefiting from GDP growth and supply chain transfer dividends. The logic behind this Asian rotation is clear: undervalued financial stocks generally offer dividend yields above 5%, far higher than US stocks, with solid fundamentals.

Major institutional investors’ detailed operations: foreign investors lead, with a focus on large-cap and tech stocks

Today’s net buying data shows precise capital allocation:

Foreign investors bought NT$14.088 billion, adding for four consecutive days, with a total of NT$36.8 billion this week, mainly focusing on TSMC (10,500 shares, closing at NT$1,495, up 2.4%), Hon Hai (5,200 shares, up 0.43%), and Nanya Technology (2,500 shares, up 6.86%). Investment trusts bought NT$1.029 billion, shifting toward financial stocks like Fubon Financial (3,801 shares, up 2%), avoiding high-tech sectors at high levels. Proprietary traders bought NT$4 billion, targeting memory and PCB concepts, with Walsin Technology (1,800 shares, limit up) and Xinxing (1,740 shares, up 4.8%) becoming targets.

Eight major state-owned enterprises sold NT$2 billion, indicating that private capital remains the main force in this wave.

Sector rotation intensifies, but cancellation risks also emerge

The semiconductor index surged 2.31%, with Wanghong, Walsin, Vanchip, Siliconware, and Huadong hitting limit up. Nanya Technology benefited from a 15% increase in DRAM and NAND prices and inventory replenishment. The glass sector led with a 4.22% gain, with Taiwan Glass up 4.8% to NT$38.2, and Fuhua Technology up 7.73%. PCB stocks continued their hot streak, with Xinxing up 4.8%, reflecting strong AI server orders and a global electronics supply chain recovery.

However, within this rally, concentrated high cancellation ratios are evident. Stocks like Nanya Technology, Walsin, Xinxing, and Taiwan Glass have cancellation ratios as high as 30-50%, indicating short-term traders and major players are engaging in mutual shorting, which entails significant volatility risks. Although these stocks have attractive gains, retail investors should exercise extra caution when entering.

Investment advice: balance opportunities and risks

Moore Investment Consulting analyst pointed out that year-end portfolio-building is indeed happening, but historical data shows an average December gain of 4-6%, and profit-taking after rotation is often unavoidable. Taiwan stocks’ RSI has risen to 68, indicating an overbought signal.

Recommendations for investors:

• Reduce holdings in overheated short-term sectors when they rise, especially stocks with cancellation ratios over 40%
• Shift toward fundamentally solid financial and large-cap stocks, such as Fubon Financial and TSMC
• Set stop-losses within 5%, diversify holdings to monitor Fed meeting outcomes
• Keep a close eye on tonight’s US PCE data and the Fed’s decision in the coming days

Overall, the Fed effect has indeed boosted Taiwan stocks, and Asian capital rotation supports further upside potential. However, internal structural cracks are already visible. The 28,500-point level may become a stress test point at year-end. Investors should balance optimism and caution, avoiding chasing high in stocks with hot cancellation ratios to prevent getting caught in a downturn.