TSMC High-Water Mark Propels Taiwan Equity Market to World’s Fifth Largest

 

Driven by strong gains in artificial intelligence and chip stocks, several economies have quickly moved up the global market rankings. As of Monday’s close, Taiwan’s stock market surpassed India to become the world’s fifth-largest equity market.

 

Market data shows Taiwan’s stock market capitalization stood at $4.95 trillion on Monday. India, previously in fifth place, saw its market value drop to $4.92 trillion. Taiwan’s stock market now trails only the US, mainland China, Japan and Hong Kong.

 

The rally is largely fueled by a sharp surge in TSMC’s stock. The company accounts for 42% of Taiwan’s benchmark stock index. As a key chip supplier for AI development, TSMC’s share price has jumped 49% so far this year.

 

On Tuesday, TSMC’s stock fell 1.73%, with its market value hitting NT$58.87 trillion, equivalent to around $1.87 trillion. Taiwan’s Weighted Index edged down 0.27%, yet it has gained more than 48% year-to-date.

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Yi Ping Liao, a fund manager at Franklin Templeton, said Taiwan’s rising market capitalization fundamentally reflects its focus on tech hardware — a core sector in the current AI investment cycle.

 

Markets less reliant on tech hardware are being outshone by hardware-heavy markets like Taiwan and South Korea.

 

Last month, Taiwan raised the investment cap for local funds on single stocks. JPMorgan estimates this policy change will bring over $6 billion in capital inflows to the local market.

 

Despite the remarkable growth, concerns are growing over the market’s high concentration. AI investment has boosted tech firms in Japan, South Korea and Taiwan. Still, many investors worry about the fallout if an asset bubble bursts across Asian tech stocks.

 

The rally in South Korea and Taiwan is led by a handful of giant-cap companies. Most other firms and sectors remain weak amid mounting energy challenges. This raises the risk of a severe market correction ahead.

 

Meanwhile, India’s stock market has fallen more than 10% this year, dragged by soaring energy prices amid US-Iran tensions. Hit by stretched valuations and a weak rupee, global funds have offloaded nearly $240 billion worth of Indian equities.

 

That said, India’s economic size is far larger than Taiwan’s. India’s GDP reaches $4.15 trillion, compared with Taiwan’s $977 billion.

 

Alison Shimada, portfolio manager at Allspring Global Investments, noted that investors are cautious about India’s lofty valuations. She added that financialization of household savings is a clear trend in India, as residents increasingly shift wealth into financial assets.