Amid escalating concerns over potential tariff threats, foreign investors took actions that led to a significant downturn in the Taiwan Stock Exchange. The market experienced a notable decline as foreign institutional investors opted to increase short futures positions, a move aimed at hedging against perceived risks in the spot market. This cautious approach stemmed from recent statements by U.S. President-elect Donald Trump regarding possible tariffs on goods originating from China, Canada, and Mexico, which had a direct impact on the performance of prominent tech stocks.

The Taiex, the weighted index reflecting the Taiwan Stock Exchange’s performance, witnessed a substantial drop, closing at 22,334.78 points after shedding 343.98 points, equivalent to a 1.52% decrease. The trading session saw a total turnover of NT$371.73 billion (US$11.41 billion). Notably, market conditions remained tense throughout the day, with major players like Taiwan Semiconductor Manufacturing Co. (TSMC) and Hon Hai Precision Industry Co. facing downward pressure, despite the Dow Jones Industrial Average and the S&P 500 index achieving record highs in the previous session.

Foreign institutional investors adopted a cautious stance towards the local stock market, as evidenced by their accumulation of more short futures contracts compared to long ones. This approach, as highlighted by analyst Adam Lin of Moore Securities Investment Consulting, contributed to a bearish sentiment, particularly affecting tech giants such as TSMC. The sell-off in these key stocks, including Hon Hai, was a strategic move by foreign investors to capitalize on the futures market amid prevailing uncertainties.

The decline in the Taiex breached crucial technical support levels, signaling a weakened market sentiment and raising concerns among investors. TSMC, being a pivotal stock, experienced a nearly 1% drop, significantly influencing the overall performance of the electronics sector. Similar weaknesses were observed in other semiconductor companies, with MediaTek Inc. and United Microelectronics Corp. also closing lower.

Furthermore, concerns over potential impacts of Trump’s tariff policies on investment plans in Mexico led to a sell-off in Hon Hai shares. The company, known as Foxconn in global markets, had intentions of establishing a significant artificial intelligence server factory in collaboration with Nvidia Corp. The broader market sentiment was also influenced by developments such as the ceasefire between Israel and Hezbollah, which had ripple effects on industries like transportation and petrochemicals.

The transportation sector witnessed a notable decline, with key players like Evergreen Marine Corp. experiencing a significant drop in stock value. Similarly, the petrochemical industry faced pressure as international crude oil prices weakened. Amidst these fluctuations, the financial sector remained relatively stable, with companies like Fubon Financial Holding Co. experiencing moderate losses.

As the market continues to navigate through uncertainties, investors are advised to closely monitor the Taiex’s movements and consider external factors like fluctuations in the value of the Taiwanese dollar, which could offer insights into the strategies adopted by foreign institutional investors. According to data from the Taiwan Stock Exchange, foreign institutional investors offloaded shares worth NT$40.99 billion on the main board during the trading session.