Taiwanese flock to stocks as economy avoids pandemic

TAIPEI – Since achieving a 200% ROI last year, Robert Hou has been looking for the right time to acquire more shares in the Taiwanese stock market.

In March 2020, the 65-year-old retired trading company manager bought shares in Wan Hai Lines, a leading Taiwanese container shipping company, when it fell to a low of six. years of 13 new Taiwan dollars. Months later, he sold them for NT $ 39 each.

“I remember there were lockouts in a lot of places around the world, and the shipping stocks were running terribly because of that. But then I thought at some point you have to be shipping products. , which means you will need these shipping companies, ”he told Nikkei. Asia.

Hou said he also owns some 4,000 shares of chipmaking giant Taiwan Semiconductor Manufacturing Co. which he bought for NT $ 400 each. On May 7, TSMC closed at NT $ 599.

“I think when all of Taiwan’s economic indicators point to an upward trend, it’s not difficult for people like me, who don’t know much about investing, to make money on the stock market.” , Hou said.

It seems he’s not the only one feeling this.

A record 670,000 people opened stock trading accounts last year, according to the Taiwan Stock Exchange, and nearly half of Taiwan’s population now invests in stocks. © EPA / Jiji

A record 670,000 people opened stock trading accounts last year, according to the Taiwan Stock Exchange. This brings the total number of accounts to 11.24 million, which means that almost half of the Taiwanese population now invests in stocks. More than 42% of those who opened an account last year are under 30, the data shows.

In restaurants, cafes and even elevators, stock prices are often the topic of conversation. “Every morning when I’m in the elevator to my office, I see almost everyone’s smartphone screen showing trading systems and stock prices,” said Perry Chien, head of business. technology industry, in Nikkei Asia. “The grandmothers and grandfathers sitting at the next table in the restaurants are also talking about semiconductor stocks.”

This influx helped push the trading volume on the Taiwan Stock Exchange to a record high of over NT $ 600 billion on April 22. Its weighted index, which had fallen below 10,000 points in March 2020, hit an all-time high of 17,572 on April 26.

Semiconductor stocks have been the main driver of the Taiwanese stock market amid soaring global demand for chips.

Shares of TSMC – which represent more than 30% of the total market capitalization of the Taiwan Stock Exchange – have more than doubled in the past year, while smaller rival United Microelectronics has seen its shares quadruple in the past year. the same period. Shares of memory chipmaker Nanya Technology were up 40% on April 29 from a year earlier. MediaTek, the world’s second-largest mobile chip designer, after Qualcomm, has jumped more than 185% in the same period.

As demand for chips drives tech stocks up, Taiwan’s success in containing the spread of COVID-19 and strong economic growth – 2.98% in 2020, overtaking China for the first time in 30 years – have yielded a boost to “safe” stocks, too.

“Stocks in China Steel very rarely move much,” said Jane Wu, a housewife and long-time Taiwan Stock Exchange investor. “I bought them because they are very stable. It’s like saving money in the bank, but with dividends a little better than bank interest rates.”

But the share price of Taiwan’s biggest steel maker has suddenly doubled from a year ago, and now Wu says she is looking to sell some of her shares.

The surge in stock prices has spread to everything from commodities like copper and steel to shipping companies Hou has bet on. Shares of Taiwan’s two largest shipping companies – Evergreen Marine and Yang Ming Marine Transport – have soared more than seven times and 11.5 times, respectively, compared to a year ago.

“We can see that money across the world is flowing into the stock markets, supported by quantitative easing measures from countries around the world, and we have not seen any signs of tightening of these measures by central banks. said Darson Chiu, a researcher at the Department of International Affairs and Macroeconomic Forecasting Center of the Taiwan Economic Research Institute, told Nikkei Asia. “Although the Taiwan stock market is very dynamic at the moment, I would advise investors to invest cautiously, as there are always corrections from time to time.”

Another potential risk to the island’s stock market comes from the tech industry, which is currently the engine of its economic growth.

The chip shortage plaguing automakers and electronics makers has highlighted the global importance of Taiwan’s semiconductor industry, with governments in the United States, Germany and Japan all pushing for on Taipei to help solve the problem.

“It is good that the importance of Taiwan is emphasized, but it is also a double-sided blade that many countries have realized their dependence on Taiwan,” Roy Chun Lee, deputy executive director of the Taiwan OMC & RTA Center at the Chung Hua institution for Economic Research, told Nikkei Asia. “We are now seeing that the United States, Europe and also Japan are striving to bring chip manufacturing back to earth, which could be a hidden concern for Taiwan in the long run.”

Particularly noteworthy is Intel’s $ 20 billion plan to expand capacity in the United States, he said. “We need to monitor and be careful whether the United States, Europe and Japan will favor their local suppliers over foreign suppliers within their borders. … Taiwan must strengthen the confidence of other countries on the island, to accept that products made in Taiwan or by Taiwanese companies are the best balance between research and development, production and chain safety. supply. “

US-China tensions add another layer of uncertainty to the island’s chip industry, as do severe water shortages – chipmaking is a water-intensive business and Taiwan is in the midst of its worst drought for over 50 years.

Still, tech companies are feeling optimistic – for now.

“The stock market is really good. Look at the Taiwan Stock Exchange index – it has gone from less than 10,000 points last March to around 17,000 points now. Almost all of the major industries are on the rise,” he said. Lai Ming-kuen, Managing Director of Acter, a builder of high-tech installations for Google, TSMC and many others.

“Our business is also booming. What we don’t know, however, is if there will be any major “black swan” events to come, even if we don’t anticipate major disruptions on the horizon. … After all, there has never been a cycle that only involves surges but no corrections. “

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