The Taiwan Monthly

Market & ETP Overview

Stock market remains normal operation despite the pandemic

The COVID-19 pandemic has swept the world since 2020. Thanks to the Taiwan government’s adequate precautionary measures, domestic industries have been able to maintain stable operations. Our domestic economy continues to grow, and the stock market has made outstanding historic achievements in terms of index price, trading value and market capitalization. Earlier, as the local confirmed COVID-19 cases once escalated, the TAIEX has experienced a temporary fluctuation.  Nevertheless, the Taiwan Stock Exchange (the “TWSE”) has made comprehensive preparations to manage various challenges and uncertainties.

 

• Macroeconomic performance remains stable, operating performance of listed companies is great

COVID-19 has devastated the global economy, resulting in the disruption of many industries’ supply chains and a surging demand for new technologies. The performance of the Taiwan economy which is dominated by the high-tech industry has continued to rise, and the performance of traditional industries that were affected by the pandemic has also resumed this year. According to the Directorate-General of Budget, Accounting and Statistics, Taiwan’s real GDP maintained a positive growth rate of 3.12% last year, and reached 8.92% in the first quarter of this year, a new seasonal high in the last ten and a half years. It is predicted that the real annual GDP will grow by 5.46%.

 

The economic strength is reflected in the performance of listed companies. The total net profit before tax of TWSE-listed companies in 2020 was NT$2.9 trillion, a YOY increase of 21.5%. It is estimated that the dividend to be paid this year will reach a new record high of NT$1.5 trillion. As Taiwan stocks benefitted from strong demands for the semiconductor, shipping and steel industries, the total net profit before tax reached NT$1,157.1 billion in the first quarter of this year, a 1.7-fold increase over the same period of last year, and the accumulated revenue from January to May 2021 was NT$14.7 trillion, a 23.17% increase over the same period of last year, more than 80% of listed companies with accumulated revenue growth, all are record high in recent years. The outstanding performance of listed companies has also led to the synchronous growth of employees' salary. Last year, the average salary of employees of listed companies increased by 4.6%, which is the highest since the launch of the statistics in the past three years.

 

• Taiwan stock market rationally reflects changes in the pandemic situation

Taiwan had solid pandemic preventions in place even before the pandemic became a global threat. While there has been a recent rise in the number of cases, it is still quite manageable compared with those of other countries. In mid-May, the Taiwan stock market experienced significant volatility due to the sudden upsurge of domestic infection cases; however, the decline of the TAIEX quickly recovered, and foreign investors returned to the market. At the end of May 2021, the TAIEX returned to 17,000 with a cumulative increase of 15.9% in the first five months of this year, and a cumulative increase of 51.5% in the past two years.

 

May’s trading value of TWSE-listed stocks set a new record of NT$11 trillion in the month, and reached NT$38.5 trillion in the first five months of the year. The fact that the trading momentum of the Taiwan stock market remains unchanged under the impact of the pandemic situation shows investors' confidence in the nation’s pandemic prevention measures.

 

• Comprehensive response and deployment to ensure continuation of market operations

At the beginning of the worldwide pandemic in 2020, the TWSE prepared specific measures to ensure no interruption of its operation and service. It obtained the international standard certification of "ISO 22301 Business Continuity Management System", and when the domestic pandemic situation worsened in May this year, it immediately launched the remote and home office mechanism and urged securities firms to take contingency measures to ensure the normal trading of the stock market.

 

The TWSE closely monitors the impact of the pandemic on stock market, and strengthens market surveillance and timely warnings. At present, all risk control mechanisms work effectively, and the overall trading order has experienced no complications. The cumulative default rate in the first five months of this year was only 0.004%, which is at a low level compared with those in the past 10 years; the margin trading leverage ratio is still in the safe range of around 180%.

 

In addition, the TWSE complies with various pandemic prevention policies to maintain the transparency of market information, so as to ensure that the information of listed companies can be transmitted to the market in a timely manner.

 

• Conclusion

Taiwan's economic growth and stock market performance have won international recognition after taking more than a year of precautions against pandemic. Recent spikes in domestic cases are controllable with an overall minimal economic impact due to Taiwan’s solid industrial fundamentals, the proper response of the capital market, the timely introduction of relief measures by the government, and the rational cooperation of all the people in pandemic prevention. The TWSE remains committed to supporting government policies and maintaining sustainable capital market operations to support Taiwan's economic development now and in the future.

 

For further information, please contact Ms. Yang at 1214@twse.com.tw.