Taiwan Equity

Taiwan equity, driven by AI demand, outperformed APAC in 2023 and 2024 but experienced a sell-off in 1Q25 and April, leading to more attractive valuations. Despite the recent pullback, strong fundamentals, particularly in the Tech industry, including robust ROE and EPS growth, coupled with healthy capex trends among global tech leaders, suggest a supportive longer-term outlook for Taiwan's critical role in the global technology supply chain.

Analysis

Taiwan equity demonstrated significant outperformance in 2023 and 2024 relative to the APAC region, a surge largely attributed to explosive AI-driven demand. A subsequent sell-off in the first quarter of 2025 and April has resulted in FTSE Taiwan’s valuation normalizing to its 10-year average, positioning it as more attractively valued when compared against its regional peers. Despite this market correction, fundamental indicators remain strong, particularly within the Tech industry, which continues to exhibit robust Return on Equity (ROE) and Earnings Per Share (EPS) growth. The supportive longer-term outlook is further reinforced by persistent, healthy capex trends among global technology leaders, underscoring Taiwan's critical role within the global technology supply chain. This confluence of factors suggests that while market dynamics have shifted valuations, the underlying fundamental strength, especially in technology, persists.

Key Decisions for Investors

• Investors might consider the recent pullback in Taiwanese equities, particularly within the technology sector, as a potentially attractive entry point given the normalization of valuations against a backdrop of strong underlying fundamentals such as ROE and EPS growth.
• Maintaining exposure to Taiwan's tech sector appears warranted due to its critical role in the AI-driven global supply chain and supportive long-term capex trends from global tech leaders, indicating a positive longer-term outlook.
• It is advisable to closely monitor continued EPS growth momentum within the Taiwanese tech sector and global capex figures in technology to validate the ongoing strength of the investment thesis.