Taiwan stock market weekly: AI tech stocks push TAIEX to new highs, while easing of the TSMC weight cap brings potential incremental inflows

Overview

Goldman Sachs’ Taiwan weekly report focuses on the sharp rise in the Taiwan stock market driven by renewed strength in AI and tech stocks. This week MSCI Taiwan rose 7.4% and TAIEX rose 5.8%, outperforming MXAPJ by 6.3 percentage points. The gains were almost entirely driven by the tech sector, with Other Semis, TSMC, and Tech Hardware up about 10%, 8%, and 6%, respectively; in contrast, Energy fell 6%, while domestic sectors such as Mining, Health Care, and Consumer lagged. The report also highlights the impact of Taiwan FSC’s relaxation of the single-stock holding cap for domestic equity funds and active ETFs, viewing the policy as mildly positive for TSMC but potentially creating marginal pressure on other large-cap tech stocks due to capital reallocation.

Core views

The core views include: first, short-term performance in the Taiwan market is dominated by the AI theme and the semiconductor chain, while non-tech and domestic demand sectors have not benefited in tandem. Second, foreign investors made net purchases of US$4.1bn in Taiwan stocks this week, mainly flowing into the tech sector and TSMC, but at the same time increased net short index/futures positions by US$0.8bn, indicating coexistence of cash equity buying and derivatives hedging. Third, local capital made net purchases of US$1.0bn in tech stocks while net selling US$600mn in non-tech stocks, further concentrating capital structure toward tech. Fourth, TSMC’s weight in TAIEX has risen to 44% over the past six years; foreign investors have net sold about US$32bn of TSMC since October 2025, reducing foreign ownership to around 71%, the low end of the historical range, while local fund ownership including ETFs has risen to 3.1%. Fifth, early 1Q26 earnings results have been relatively strong, with 58% of 70 companies beating expectations, supporting the stability of market earnings expectations for 2026-2027.

Analysis framework

The report uses a weekly strategy framework combining market performance, sector performance, capital flows, ETF flows, earnings revisions, valuation, macro indicators, and special thematic events. It focuses on metrics such as relative performance of TAIEX/MSCI Taiwan, buying and selling by QFII and local institutions, ETF subscription/redemption structure, changes in TSMC weight and holding caps, the proportion of 1Q26 earnings surprises, EPS revisions, and the TSMC ADR premium reversal index to assess short-term momentum, capital constraints, and relative risks in the Taiwan market.

Methodology notes

• Market strategyGS Strategy View, Returns, Valuations, Growth, Earnings Revisions and Foreign Flows

  Taiwan market/sector scorecard

  The report compares returns, valuation, growth, earnings revisions, and foreign capital flows within a unified framework to assess the relative attractiveness of the overall Taiwan market and various sectors.

• Earnings analysisFactSet bottom-up consensus estimates

  Bottom-up consensus earnings estimates

  Fundamental indicators such as earnings and valuation are mainly based on FactSet bottom-up consensus estimates, used to track 1Q26 earnings surprises, 2026E/2027E EPS revisions, and sector earnings momentum.

• Quantitative modelTSMC ADR Premium Reversal Index (GSSRTSMR)

  TSMC ADR premium reversal index

  This index is used to assess reversal risk in TSMC’s ADR premium. The report shows the ADR premium fell to 15%, with the reversal index at +0.1, a relatively neutral level; feature contributions are based on historical average SHAP values.

• Capital flow analysisQFII, domestic funds, ETF and futures flow monitor

  Multi-participant capital flow tracking

  The report separately tracks net open interest and flows of foreign investors, domestic funds, brokers/proprietary desks, non-institutional investors, ETFs, and futures to judge the relationship among cash equity buying, ETF structural migration, and hedging positions.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• TAIEX / MSCI Taiwan

  Taiwan equity market benchmarks

  Strengths

  Significantly outperformed regional markets this week, driven by AI and tech stocks; the current TAIEX index level is 38,932.

  Weaknesses

  Market breadth was insufficient, with domestic and non-tech sectors lagging.

  Comparison

  MSCI Taiwan/TAIEX rose +7.4%/+5.8%, respectively, outperforming MXAPJ by 6.3 percentage points.

  Risks

  It is highly dependent on the weights of TSMC and tech hardware; if the AI theme weakens or capital flows reverse, the index may come under pressure.

• TSMC

  Core heavyweight stock in the Taiwan market and a key AI semiconductor asset

  Strengths

  Rose about 8% this week and accounts for about 44% of TAIEX weight; the relaxation of the active fund holding cap may bring US$2bn to US$6bn of potential buying.

  Weaknesses

  Foreign investors have net sold about US$32bn since October 2025, reducing foreign ownership to about 71%.

  Comparison

  TSMC’s weight in TAIEX has risen sharply over the past six years, and it also has substantial influence in MSCI Taiwan and MSCI EM.

  Risks

  Excessive concentration, holding constraints among foreign/EM/AEJ funds, ADR premium reversal, and policy-driven capital deployment falling short of expectations.

• Taiwan tech hardware and semiconductor sectors

  Main beneficiary sectors of the AI theme

  Strengths

  Other Semis rose about 10% and Tech Hardware rose about 6%; the tech sector attracted net inflows from both foreign and local capital.

  Weaknesses

  Valuations and earnings expectations are sensitive to the sustainability of AI demand.

  Comparison

  Clearly outperformed lagging sectors such as Energy, Mining, Health Care, and Consumer.

  Risks

  If AI orders, exports, or earnings revisions slow, rotation pressure in the sectors may increase.

• Taiwan non-tech/domestic sectors

  Internal drags within the market

  Strengths

  Some consumer, financial, commodities, and capital goods companies are still participating in 1Q26 earnings reporting and earnings revisions.

  Weaknesses

  Energy fell 6% this week, while Health Care and Consumer lagged; local capital made net sales of US$600mn in non-tech.

  Comparison

  Their capital attractiveness is clearly weaker than that of the tech sector.

  Risks

  Continued capital concentration toward tech may further worsen relative performance.

• Taiwan ETFs

  Local capital allocation tools

  Strengths

  Non-dividend ETFs saw inflows of US$2.1bn, indicating that capital is still participating in the market through ETFs.

  Weaknesses

  Dividend ETFs saw outflows of US$1.4bn, showing cooling enthusiasm for dividend products.

  Comparison

  Capital shifted from dividend products to non-dividend products, with clear structural divergence.

  Risks

  If ETF subscriptions/redemptions reverse or dividend ETF outflows continue, high-dividend and heavily held stocks may come under pressure.

• TWD / USDTWD

  Macroeconomic and capital-flow-related variables for the Taiwan market

  Strengths

  TWD strengthened to 31.5, appreciating about 0.2% during the week.

  Weaknesses

  The exchange rate is still affected by foreign capital flows, the US dollar, and regional risks.

  Comparison

  The report also tracks USDTWD and USDCNY as part of overall macro-financial conditions.

  Risks

  If the US dollar strengthens or foreign capital exits, a weaker TWD could affect foreign investor returns.

Key data

• Weekly performance of MSCI Taiwan/TAIEX+7.4% / +5.8%Outperformed MXAPJ by 6.3 percentage points.
• Main leading sectorsOther Semis +10%, TSMC +8%, Tech Hardware +6%The gains were driven by technology and the AI theme.
• Main lagging sectorsEnergy -6%, Mining, Health Care, Consumer laggedDomestic and non-tech sectors dragged on overall market breadth.
• QFII net buyingUS$4.1bnMainly contributed by Tech, including about +US$0.9bn in TSMC and +US$2.7bn in other tech.
• Foreign futures positionsNet shorts increased by US$0.8bnIndicates that cash equity buying was accompanied by derivatives hedging.
• Local capital flows in tech/non-techNet buying of US$1.0bn in tech, net selling of US$600mn in non-techCapital continued to concentrate in tech.
• ETF flowsDividend ETFs saw outflows of US$1.4bn, non-dividend ETFs saw inflows of US$2.1bnThere was an internal ETF shift from dividend products to non-dividend products.
• 2027 EPS revisions+1.5%Driven by Commodities, Tech, and Capital Goods.
• TSMC ADR premium15%, down 1 percentage point from the previous periodThe GSSRTSMR reversal index was +0.1, which the report described as relatively neutral.
• Taiwan macro dataIndustrial production +28.7% yoy, retail sales +3.2% yoy, export orders +65.9% yoyIndustrial production was above GSe +25.5%, while export orders accelerated significantly from +23.8% in February.
• Single-stock holding cap for active fundsRaised from 10% to 25%Taiwan FSC relaxed the single-stock cap for domestic equity funds and active ETFs.
• Potential TSMC buyingA 5 percentage point increase implies about US$2bn; full use of the 25% cap implies up to about US$6bnBased on estimates of about US$40bn in AUM of domestic active funds close to the TSMC 10% cap.
• Foreign ownership of TSMCAbout 71%At the low end of the historical range; foreign investors have net sold about US$32bn of TSMC since October 2025.
• Local fund ownership of TSMC3.1%Including ETFs; the report shows the local ownership share has increased.
• 1Q26 earnings reporting progress70 companies, covering 51% of Taiwan market cap58% beat earnings expectations, 22% missed expectations, with median earnings/sales surprises of +9%/+2%.
• Current TAIEX index level38,932The report states the data is as of April 24, 2026.

Impact & implications

The implications of the report for Taiwan equities are: short-term index gains remain highly dependent on AI, semiconductors, and TSMC; the policy relaxation of the single-stock holding cap for active funds may reduce tracking pressure on domestic active capital relative to benchmarks and bring additional buying into TSMC; however, further increases in market concentration may also cause other large-cap tech stocks to passively bear reallocation outflows. From a capital-flow perspective, foreign cash equity covering and local capital preference for tech provide positive support, but increased futures shorts, dividend ETF outflows, and weakness in non-tech sectors suggest that risk appetite has not improved across the board. On the earnings side, relatively strong initial 1Q26 disclosures and upward 2027 EPS revisions strengthen fundamental support.

Risks

• The rise in the Taiwan market is highly concentrated in TSMC, semiconductors, and tech hardware, with insufficient market breadth.
• Although foreign investors made net purchases in cash equities, they simultaneously increased net short futures positions, indicating ongoing demand for hedging and risk control.
• Relaxation of the single-stock cap for active funds may benefit TSMC, but it may also lead to reallocation-driven selling in other large-cap tech stocks.
• Dividend ETFs recorded US$1.4bn in outflows, indicating a reversal in part of the local capital structure.
• Foreign investors have net sold about US$32bn of TSMC since October 2025, and foreign ownership is at the low end of historical levels, so further covering is not certain.
• If enthusiasm for the AI theme, export orders, or tech earnings revisions slow, the Taiwan index may face valuation and positioning concentration pressure.
• Geopolitical risks such as the Cross-Strait Risk Index still need to be monitored.

What to watch

• Next week’s consumer confidence data and 1Q26 GDP.
• Follow-up earnings disclosures and EPS revisions from TSMC and other semiconductor/tech hardware companies.
• Whether domestic active funds actually increase TSMC allocation after Taiwan FSC relaxes the single-stock holding cap.
• Whether QFII net cash equity buying continues and whether net short futures positions expand further.
• Whether the divergence in flows between dividend ETFs and non-dividend ETFs continues.
• Changes in the TSMC ADR premium and the GSSRTSMR reversal index.
• Whether Taiwan industrial production, export orders, retail sales, and monthly sales tracking continue to support earnings growth.
• Changes in foreign ownership, domestic fund ownership, and TSMC’s weights in TAIEX/MSCI Taiwan/MSCI EM.