Taiwan's benchmark Taiex fell 5.7% in October after coming within 200 points of 50,000, as foreign investors pulled close to NT$1 trillion out of the market and cut their holdings in Taiwan Semiconductor Manufacturing Co. and other tech names.

The index closed Oct. 30 at 45,211.83, down 2,728.30 points from 47,940.13 at the end of September, according to daily data from the Taiwan Stock Exchange. Foreign institutional investors sold a net NT$994.3 billion (US$30.59 billion) of shares over the month, dealers told the Central News Agency (CNA), with TSMC, IC designer MediaTek and power supplier Delta Electronics among the stocks they sold most.

For investors across Asia, Taiwan is the purest listed play on AI hardware. TSMC alone accounts for more than 40% of the exchange's market value, so a turn in sentiment toward AI spending shows up in the Taiex faster than almost anywhere else, and the selling in Taipei moved in step with losses in Seoul and Tokyo, where the Nikkei 225 shed 5.2% in October.

From a record near 50,000 to below the 120-day average

The month started strongly. On Oct. 5 the Taiex jumped 2.55% to a record, after weak U.S. jobs data for August cut the odds of a Federal Reserve rate increase, CNA reported. TSMC rose 3% that day to a record close of NT$2,575 and accounted for about 600 points of the gain. Exchange data show the index edged higher again on Oct. 6 to close at 49,822.55, its peak for the month and less than 200 points short of 50,000.

It never got there. Hotter-than-expected U.S. inflation data for September hit tech stocks on Oct. 15, when the Taiex dropped 1,655.96 points, or 3.41%, the sixth-largest single-day point loss in its history, according to CNA. Foreign investors sold a net NT$302.56 billion of shares on the main board that day, exchange figures cited by CNA showed. ASE Technology fell by its 10% daily limit, while MediaTek slid 6.93% and Delta lost 8.68%.

Kevin Su, an analyst at Hua Nan Securities, told CNA at the time that higher interest rates would raise funding costs for AI companies just as tech valuations were stretched.

The last week of the month brought a second blow. U.S. cloud companies reported earnings, and Alphabet's sales disappointed while Amazon's AI spending jumped, CNA reported. On Oct. 30 the Taiex fell 2.49%, with the electronics index down 2.90%. TSMC dropped 1.86% to NT$2,370, taking about 360 points off the index, and custom-chip designer Alchip Technologies lost 6.93%. Foreign investors sold a net NT$112.47 billion that day, according to the exchange.

Lu Chin-wei, an analyst at Concord Capital Management, told CNA that investors were trimming tech positions after big gains this year. He said the close below the 120-day moving average, near 45,300, left room for further losses. The October close was about 9.3% below the Oct. 6 peak.

Where the money went

Defensive shares held up. On Oct. 30, Chunghwa Telecom rose 1.27% and Far EasTone gained 0.88%, while the financial index slipped just 0.16%. Lu told CNA he suspected government-led funds were buying financial stocks.

MediaTek's fall was steeper than TSMC's. The stock closed at NT$3,915 on Oct. 30, about 24% below its Oct. 5 close of NT$5,165, based on CNA's reported prices.

Retail investors kept coming. The exchange said there were 14.827 million stock trading accounts at the end of October, a record and 64,000 more than a month earlier, with investors aged 30 and under opening 56.3% of new accounts. Even after October's fall, the Taiex was up 55.81% for the year, CNA said, citing exchange data.

TSMC ADRs point to more pressure

Friday trading in New York added to the strain. TSMC's American depositary receipts fell 5.95% on Oct. 30 as the Philadelphia Semiconductor Index dropped 7.20%, and Taiex futures lost 867 points to 44,433 in overnight trading, CNA reported.

Tony Huang, chief strategy officer at Taishin Securities Investment Advisory, told CNA that worries about whether cloud providers can earn enough from their AI investments were weighing on sentiment. He said Taiwan had held up better than South Korea, where memory makers dominate trading, and noted that Meta, Alphabet, Amazon and Microsoft had all kept their AI spending plans.

Dealers also pointed to the U.S. midterm elections on Nov. 3 and a planned mid-November initial public offering by AI company Anthropic as reasons some large funds were taking money out of Asian markets, according to CNA.

The first session of November brought a smaller loss than the futures implied. The Taiex closed Monday down 0.65% at 44,920.14, CNA reported, finishing above the Oct. 30 intraday low of 44,726 that dealers had flagged as the level to watch. The close left the index about 9.8% below its Oct. 6 peak. The next test is the U.S. vote on Tuesday, Nov. 3.