Taiwan equities remain under pressure, with foreign selling and tech correction as the short-term main theme

Overview

This report is Goldman Sachs' weekly tracking of the Taiwan market, covering market performance, sector strength, style factors, ETF and foreign flow trends, valuation, earnings revisions, TSMC ADR premium, macro indicators, and policy risks. The key takeaway is that Taiwan equities remain under short-term pressure, with tech correction and foreign selling as the main drags, while TSMC has held up relatively well and some earnings expectations continue to be revised upward.

Core views

The report believes near-term risks in the Taiwan market are centered on continued foreign selling, a correction in the technology sector, and elevated valuations. Financials, healthcare, and chemicals outperformed relatively, while utilities, tech ex-TSMC, and capital goods lagged. TSMC's relative resilience shows that the semiconductor leader still has defensive qualities, but the ADR premium has widened rapidly to 20% and has triggered a potential reversal signal, so investors should watch for premium compression and changes in flows.

Analysis framework

The report uses a weekly market dashboard framework that combines index and sector performance, QFII and local fund flows, ETF subscriptions/redemptions, margin and futures positioning, valuation percentiles, EPS revisions, ADR premium reversal indicators, and macro data to assess short-term risk appetite and structural opportunities in Taiwan equities.

Methodology notes

• Market performanceTaiwan market and sector weekly scorecard

  Compares the performance of the TAIEX, MSCI Taiwan, MXAPJ, and Taiwan sectors.

  Identifies short-term winners and drag sources through relative returns across indices, sectors, and style factors.

• Fund flowsQFII and local fund flow monitoring

  Tracks changes in foreign investors, local funds, ETFs, futures, and margin balances.

  Foreign net selling and futures positioning are used to gauge overseas risk appetite, while local fund and ETF inflows are used to observe domestic absorption capacity.

• Valuation and earningsForward P/E and EPS revision framework

  Uses 12-month forward P/E, historical standard deviation, and EPS revisions to assess valuation and earnings alignment.

  When valuation is above average and flows weaken, the market becomes more sensitive to earnings delivery and macro data.

• Arbitrage and reversalTSMC ADR Premium Reversal Index GSSRTSMR

  Monitors TSMC ADR premium and potential reversal signals.

  When the ADR premium rises to a high level, it may indicate convergence in cross-market pricing differences or short-term crowded-trade risk.

Asset mapping & comparison

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

• TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD / US.TSM

  A core weight in Taiwan technology and semiconductors, and one of the main names subject to foreign selling, while also holding up relatively well this week.

  Strengths

  TSMC fell about 0.5%, significantly better than the roughly 4% drop in Tech ex-TSMC; semiconductors remain positive year-to-date and over the past three months.

  Weaknesses

  The ADR premium rose to 20%, and the reversal index points to a potential pullback; foreign selling is concentrated in TSMC.

  Comparison

  Compared with Taiwan's overall tech sector, TSMC is more resilient in the near term; compared with financials, healthcare, and chemicals, the broader tech sector remains under pressure.

  Risks

  Continued foreign net selling, ADR premium compression, tech valuation de-rating, and weaker-than-expected macro data.

• TAIEX / MSCI Taiwan

  The main Taiwan market risk assets tracked by the report.

  Strengths

  Local funds and ETFs still saw net inflows, and 2027E EPS was revised slightly upward.

  Weaknesses

  The index continued to fall this week and lagged MXAPJ; forward valuations remain in the elevated range.

  Comparison

  Financials, healthcare, and chemicals outperformed relatively, while utilities, tech ex-TSMC, and capital goods lagged.

  Risks

  Foreign outflows, valuation compression, weaker earnings revisions, and policy and FX volatility.

Key data

• MSCI Taiwan/TAIEX weekly performance-1.3% / -1.6%Lagged MXAPJ by 1.7 percentage points.
• Technology sector performanceTech ex-TSMC -4%, TSMC -0.5%The tech selloff continued, but TSMC was relatively more resilient.
• QFII fund flowNet sold US$5.1bnSelling was concentrated in TSMC, tech stocks, and ETFs.
• Local fund flowNet bought US$1.6bnBuying was concentrated in the technology and financial sectors.
• ETF inflowsDividend ETFs US$700mn, non-dividend ETFs US$1.0bnETFs still saw inflows, providing some support to the market.
• Forward 12-month P/E18.0xAbout 1.5 standard deviations above the historical mean.
• 2027E EPS revision+0.4%Driven by industrials, materials, and technology; financials and consumer sectors were revised down.
• TSMC ADR premium20%, up 6 percentage pointsGSSRTSMR at +0.6, indicating a potential reversal.
• S&P Global PMI53.3Down from 55.2 in February.
• TWSE 12-month index target36,000The chart shows Goldman Sachs' 12-month index target through March 2027.

Impact & implications

For investors, Taiwan equities remain constrained in the short term by foreign outflows, de-risking in tech, and elevated valuations, so position management should focus on turning points in fund flows, a reversal in the TSMC ADR premium, and macro data. Structurally, TSMC and semiconductors remain core Taiwan assets, but if foreign investors keep selling or the ADR premium narrows, short-term volatility could increase.

Risks

• Continued net foreign selling could amplify volatility in Taiwan equities.
• The technology sector excluding TSMC fell sharply, indicating weak market breadth.
• The forward 12-month P/E is 18.0x, about 1.5 standard deviations above the historical mean, leaving limited room for valuation error.
• TSMC's ADR premium rose to 20%, creating a risk of premium compression or cross-market spread convergence.
• PMI fell from 55.2 to 53.3, indicating a marginal slowdown in macro momentum.

What to watch

• Whether QFIIs continue to net sell TSMC, tech stocks, and ETFs.
• Whether the TSMC ADR premium and GSSRTSMR reversal index move further higher or begin to ease.
• Taiwan FX reserves, inflation, and export trade data.
• Whether 2027E EPS revisions spread from technology, industrials, and materials to more sectors.
• Whether local fund and ETF inflows can offset foreign selling pressure.