Foreign Investors Execute Second-Largest Sell-Off in History: Analysts Point to Hedging and Arbitrage

The Taiwan Stock Exchange experienced a sharp downturn today, with the weighted index plummeting by 1,683 points. Total net selling by the three major institutional investor groups reached NT$205.5 billion. Notably, foreign investors net-sold NT$143.1 billion, marking the second-largest single-day sell-off in history, following the record-breaking NT$177.4 billion on the 24th. Foreign net short positions in Taiwan Index Futures decreased to 76,391 contracts, while active selling was observed in active ETFs, high-dividend ETFs, and panel stocks.

Institutional data shows that over the past three trading days, foreign investors have recorded two of the top-tier sell-off days in history, totaling NT$399.7 billion in net sales over four consecutive days. Meanwhile, investment trusts have been net buyers for four consecutive days.

Market analyst Jung Yi-shen of Chifa Investment Consulting noted that the market is overreacting to U.S. Federal Reserve policy signals and inflation concerns. He suggests that the current volatility is largely driven by hedging and arbitrage strategies by foreign investors rather than a fundamental shift toward a bearish long-term outlook. Despite high valuations in the AI and semiconductor sectors, underlying demand remains robust, and he expects potential fund inflows around TSMC's earnings call in July.