Taiwan index ends at record high, surges 65% year-to-date - What’s driving the rally?

The Taiwan stock market is on a spree of smashing old records and setting new ones. Taiwan Weighted Index (TAIEX) closed at a fresh record closing high of 48,475.74 on 2 October. Meanwhile, its all-time high is 48,601.53, which it scaled on 22 September this year.

The index has soared 65% this year so far, compared to an almost similar gain (62.5%) in Korea's Kospi, a 32% jump in Japan's Nikkei, and an about 16% rise in Wall Street's Nasdaq.

The Taiwanese market's stellar bull run has dazzled investors this year. On a monthly scale, it ended lower only in March (down 10%) and July (down 6.5%) this year.

What’s driving the rally in the Taiwan index?

The sharp rally in Taiwanese and Korean stock markets this year can be attributed to the heightened interest in AI trade, as both countries are at the centre of the global AI and semiconductor supply chain.

Taiwan is one of the world's most important manufacturing hubs in the global AI ecosystem, which is not just engaged in semiconductor manufacturing, but also in servers, networking equipment, memory, and other electronic components.

Experts point out that the global AI investment cycle has created a broad earnings opportunity across Taiwan's technology supply chain.

According to Focus Taiwan, Taiwan's exports in August hit a record $82.4 billion, a monthly high on AI-related demand. Export of electronic components jumped 58% year-on-year, and that of information and communications products rose nearly 42%. Notably, these two categories together accounted for nearly 80% of exports from the country.

Additionally, August export orders jumped 71.4% year-on-year to a record $102.96 billion, the first time monthly orders crossed $100 billion, according to Focus Taiwan.

Clearly, the stock-market rally in Taiwan is supported by a solid underlying technology demand.

Most of this year's gain in the Taiwan stock market has come from a single stock, Taiwan Semiconductor Manufacturing Company (TSMC), a Taiwanese multinational semiconductor contract manufacturing and design company. This stock is up 44% year-to-date.

According to Focus Taiwan, TSMC carries a weight of more than 40% of the TAIEX's total market value. This reflects that the performance of the Taiwanese stock market is heavily influenced by the semiconductor cycle, particularly TSMC, rather than the entire Taiwanese economy.

However, the boom in AI-related demand has also boosted the Taiwanese economy. As per Taiwan National Statistics, the country's real GDP grew 15.43% year-on-year in Q1 2026 and 12.93% in Q2. The government's latest forecast puts full-year 2026 GDP growth at 11.05%, while 2027 growth is expected to moderate to 6.04%.

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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.