Taiwan stocks hit new highs, Fubon warns of high leverage risk, optimistic about AI in H2

(CNA, Taipei, July 2nd) Taiwan stocks surged 17162 points in the first half of the year, setting a new historical record. Entering the second half, Fubon Securities expects the Taiwan stock index to challenge 54500 points by year-end, driven by traditional peak seasons, new AI product launches, and election rallies. However, it also warns that high leverage in the market has become the biggest risk for Taiwan stocks.

Fubon Financial Holdings held its mid-year 2026 Fubon Financial Trends Forum today. Fubon Securities Chairman Chen Yi-kuang described the first half performance of Taiwan stocks as "a bull meeting a gray rhino." Despite negative interferences in the first half of the year, such as the US-Iran war and major central banks leaning towards interest rate hikes, and market liquidity, Taiwan stocks' gains have led the world, driven by the unstoppable trend of the AI industry. Statistics show that as of this year, as many as 168 listed and OTC companies in Taiwan have seen their stock prices more than double, with 'thousand-dollar stocks' blooming everywhere.

Looking ahead at the trend of Taiwan stocks, Chen Yi-kuang analyzed that the improvement in corporate profits will provide a solid foundation for Taiwan stocks. In 2026, driven by strong AI demand and price increases for various components, Fubon estimates that the total profit of listed and OTC companies in Taiwan will reach NT$6.83 trillion, a significant increase of 51.1% compared to NT$4.52 trillion in 2025.

According to Fubon's statistics, the PER (price-to-earnings ratio) of Taiwan stocks from 2010 to 2025 has been in the range of approximately 10 to 24 times. Chen Yi-kuang extrapolated from this that with the upward revision of Taiwan stock corporate profits, and measured by a PER of 24 times for the next year, the Taiwan stock index is optimistically expected to challenge 54500 points by year-end.

However, Chen Yi-kuang also warned that high leverage has become the biggest risk in the stock market. He cited South Korea as an example, where the Korean stock market has frequently experienced circuit breakers recently. This is because South Korea launched 3x leveraged ETFs linked to popular stocks like Samsung Electronics and SK Hynix, which attracted a large amount of capital. If margin financing is added to this, it becomes a 5x leverage, which is astonishing.

Chen Yi-kuang believes that the end of this global stock market rally may not be caused by an industry recession, but rather by a significant increase in margin financing and leveraged borrowing in the market, eventually leading to a sell-off. The Korean stock market will be an important indicator to watch, potentially being the "canary in the coal mine" for the end of the global stock market bull run.

Compared to the Korean stock market, Chen Yi-kuang believes that Taiwan stocks do not have individual stock leveraged ETFs, and the high leverage situation is relatively controllable. However, with the stock market booming, the fear of missing out (FOMO) mentality has driven retail investors to increase their positions significantly. As of early June, the outstanding balance of margin financing for listed stocks rose to NT$583.9 billion, an increase of about 70% from the end of last year.

In addition, it was observed that non-purpose lending from brokers has also grown rapidly. By the end of May 2026, the number of stock lending transactions had jumped to 5.966 million shares, and the number of ETF transactions increased to 9.149 million shares. Estimating at 60% of market value, the overall non-purpose lending amount from brokers grew from NT$490.9 billion at the end of 2025 to NT$743.5 billion in early June 2026, a net increase of about 50%.

Secondly, Chen Yi-kuang analyzed that driven by the AI wave, capital has poured in, causing the annual volatility of the Philadelphia Semiconductor Index to increase significantly from 46% in 2021 to 85% in 2026. Taiwan stocks have a strong AI component, and with the increase in the number of "thousand-dollar stocks" in recent years, each tick has a greater impact on the index. This is reflected in the annual volatility of the weighted index, which has increased significantly from 24% in 2021 to 58% in 2026.

Furthermore, Fubon statistics show that in the first five months of 2026, the proportion of trading days with daily amplitude greater than 1% in Taiwan stocks reached 92%, and the proportion greater than 2% was 53%. Both figures are significantly higher than the average values of 61% and 14% over the past five years. Chen Yi-kuang believes that as Taiwan stocks reach historical highs, high volatility will become the norm. (Editor: Yang Kai-hsiang) 1150702

Stand with facts, your every donation is a force to protect press freedom

Download the CNA "One News" APP to get the latest news in real-time

The text, images, and videos on this website may not be reproduced, publicly broadcast, or publicly transmitted and used without authorization.