(April 7): Taiwan’s stock index tumbled the most on record to enter a bear market as trading resumed after a holiday, playing catchup to a global selloff triggered by President Donald Trump’s tariff hikes.
 
The benchmark Taiex fell 9.7% on Monday, taking its decline from a July peak to more than 20%. The drop came as US-imposed tariffs threaten to roil supply chains and slow growth amid a global trade war. Taiwan Semiconductor Manufacturing Co (TSMC), which has the top weighting in the index at more than one-third, slid by the exchange’s daily limit of 10%. The Taiwan dollar fell about 0.1% against the greenback.

While levies targeted at semiconductor exports are excluded so far, the 32% tariff on Taiwan is among the highest in Asia and caught investors off guard. TSMC’s US-traded shares slumped a total of 14% on Thursday and Friday when trading was closed in Taipei for a holiday, and China on Friday announced retaliatory tariffs on the US. 

And it wasn’t just TSMC. Virtually all of the Taiex’s 1,000-plus components fell in Monday trading.

“The Taiwan index is tech-dominant, and their tech companies are closely tied to US clients, thus suffering from dual concerns related to US over AI [artificial intelligence] investments and both first and second order impact of tariffs,” said Xin-Yao Ng, a fund manager at Aberdeen Investments.

The absence of chip tariffs limits direct risk to TSMC, Steven Tseng, senior technology analyst at Bloomberg Intelligence, wrote in a report, though he added that “rising prices under tariffs may suppress consumer demand, indirectly reducing orders for TSMC-manufactured chips”.

Concerns about geopolitical tensions and AI investments have weighed on the island’s stocks this year, with the index underperforming MSCI’s Asia-Pacific gauge by about 6.5 percentage points. Over the weekend, Goldman Sachs Group Inc downgraded Taiwan equities to underweight, citing high exposure to US exports among other reasons. 

Taiwan’s financial regulator sought to stem further fallout by tightening its rules on short-selling, which went into effect on Monday. The new measures will increase margin requirements and limit securities lending and remain in effect through April 11.

Foreign investors dumped a record US$13 billion (RM57.65 billion) of Taiwanese securities last month, dragging the local dollar 1.1% lower versus the greenback and making it Asia’s the worst-performing currency. Taiwan’s state-backed banks actively sold US dollars last week to smooth swings in the foreign-exchange market. Strategists at Bank of New York Mellon Corp and Goldman Sachs expect the currency to continue weakening.

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