【Zhenzhuo Institutional View】KGI's latest Taiwan market analysis: Geopolitical volatility presents buying opportunities, AI expected to drive new round of growth
On March 13, KGI released its latest analysis of the Taiwan market.
The US-Iran conflict has triggered short-term volatility, and the market experienced panic selling after the incident. KGI stated that, based on historical patterns, the peak of this round of panic selling may have already passed. Compared to short-term geopolitical variables, corporate earnings remain the true driver of long-term stock market trends. Looking at current corporate performance and industry trends, the sustained strong demand for AI is driving a new cycle of earnings upgrades. Investors can seize the market entry opportunities brought about by the pullback due to the conflict.
KGI pointed out that reviewing major geopolitical conflicts since 1940, as long as the event did not escalate into a global war or directly affect the US mainland, the market typically found a bottom within a week after the outbreak and recovered its losses in about three weeks. Even in the multiple military conflicts in the Middle East in recent years, the market reaction has largely followed this pattern. Observing the current market performance, the panic selling brought about by this US-Iran conflict has been largely reflected in stock prices. As long as the conflict does not expand further, the most intense selling pressure in this market wave may have already passed.
The risk currently most concerning to the market is whether the conflict will push up energy prices and reignite global inflation. The key lies in whether energy supply is substantially disrupted. Among them, the Strait of Hormuz, as one of the world's most important oil transportation routes, will be a focal point for observation. Historical experience shows that whenever tensions in the region rise, the market often reacts first by pushing up oil prices to reflect the risk of supply disruption, but if transportation is not actually hindered, the rise in oil prices is usually difficult to sustain long-term. Unless Brent crude oil prices break through $100 per barrel and remain there for several months or more, the impact of this conflict on global inflation may still be relatively limited.
Furthermore, KGI expects the overall corporate earnings growth rate for Taiwan stocks in 2026 to be significantly revised up from the previously estimated 20% to over 30%, indicating that the actual momentum of the industry boom is significantly better than previously expected, mainly due to the explosive growth in AI-related demand. Therefore, regarding investment strategy, against the backdrop of the accelerating AI and low-orbit satellite arms race, the related supply chain remains the core focus for positioning. The first choice is sectors benefiting from the specification upgrades of Nvidia's next-generation AI accelerator Vera Rubin, including thermal management, power supplies, optical communications, copper-clad laminates, connectors, and switches; the second choice is the ABF substrate and PCB sectors, which continue to face tight supply and demand.
The copyright of this article belongs to the original author/organization.
The views expressed herein are solely those of the author and do not reflect the stance of the platform. The content is intended for investment reference purposes only and shall not be considered as investment advice. Please contact us if you have any questions or suggestions regarding the content services provided by the platform.
