What affects the stock prices of TSMC and Hon Hai? Analyzing the key role of foreign investment's 40% share in the Taiwan stock market.

When I follow the Taiwan stock market every day, I often wonder why the stock prices of big players like TSMC and Hon Hai always fluctuate. In fact, as a retail investor, understanding the fluctuation factors of these weighted stocks is crucial for investment decisions.

Taiwan's transformation from a labor-intensive economy to a technology-intensive one is truly impressive. Just think, TSMC, a company established in 1987, has now become a global semiconductor giant; and Foxconn, which started as an early OEM, is now also a technology manufacturing behemoth. The rise of these companies has not only changed Taiwan's economic structure but has also completely transformed our investment environment.

The Absolute Influence of the US Market

The influence of the US market on the Taiwan stock market is truly omnipresent. Whenever I see the Nasdaq or the Philadelphia Semiconductor Index plummet, I know for sure that the Taiwan stock market will have a tough day the next day. Especially with the close cooperation between TSMC and NVIDIA, any fluctuations in the US tech stocks can stir up waves in the Taiwan stock market.

The Federal Reserve's interest rate policy is like a butterfly effect. Every time Powell speaks about interest rate cuts or hikes, foreign capital starts to significantly enter the Taiwanese stock market, and these changes in capital flow often reflect in stock prices faster than the fundamentals.

The Complexity of Local Factors in Taiwan

The impact of export data on the Taiwan stock market is self-evident. Every time it is announced monthly, the market keeps a close watch. After all, Taiwan's economy heavily relies on exports, especially semiconductors and electronic products.

The central bank's monetary policy is also crucial. The fluctuation of the New Taiwan Dollar exchange rate directly affects the profitability of export companies. Each time the New Taiwan Dollar appreciates significantly, electronic stocks will be under pressure; depreciation may boost export stocks.

The Sensitive Impact of Cross-Strait Relations

To be honest, as Taiwan's largest trading partner, any changes in the relationship between mainland China and Taiwan will be fully reflected in the Taiwan stock market. I have noticed that whenever cross-strait relations become tense, the Taiwan stock market tends to experience a certain degree of decline, and foreign investors will also reduce their positions. This geopolitical risk is a reality that Taiwan stock investors have to face.

What concerns me the most is the 40% shareholding ratio of foreign investment. This means that every move of foreign investors can trigger market fluctuation. Sometimes the fundamentals remain unchanged, but when foreign investors buy or sell in large quantities, it can cause significant price fluctuations in individual stocks.

For us retail investors, understanding these influencing factors is not about predicting the market, but rather about remaining calm during market fluctuations. After all, the stock market is always influenced by various factors, and no one can have complete control over it.

Investing in Taiwan stocks, especially in these tech giants, requires us to have a global perspective while also closely following local economic and policy changes. In this highly interconnected market, single factors rarely determine everything, but understanding how these factors intertwine and influence each other can help us make more informed investment decisions.