Taiwan Stock Exchange Growth

Let’s compare the Taiwanese stock market with the Chinese and Hong Kong stock markets.

1. Taiwan Stock Exchange Growth 117.4%…China 4.3% Up, Hong Kong 15.4% Down

From May 20, 2016, when President Tsai Ing-wen took office, to December 15, 2023, Taiwan’s stock market rose 117.4%, the highest rate of return among East Asian countries. On the other hand, during the same period, the Chinese stock market rose only 4.3%, and the Hong Kong stock market fell 15.4%, making it the worst performance.

It is also noteworthy that while the Hang Seng in Hong Kong, which had exceeded 30,000 in early 2018, fell to 16,000 units, the Hang Seng Index rose from 10,000 to 17,000, surpassing the Hang Seng Index. In addition, the decline in the Hang Seng in Hong Kong is largely due to the Xi Jinping administration’s anti-trust policy targeting Chinese Internet companies such as Alibaba and Tencent. Let’s take a closer look later.

Looking back to East Asia, the Japanese stock market, which rose 97%, stood out, while the Korean and Singapore stock markets rose 31.6% and 12.8%, respectively.

Since May 2016, compare the Shanghai index, which represents China, with the Taiwan family index. While the Taiwan family index rose by more than 100% from 8463.61 at the end of May 2016 to 17,751.73 on December 26, 2023, the Shanghai index remained almost unchanged from 2821.05 to 2898.88.

China has three stock exchanges: the Shanghai Exchange, the Shenzhen Exchange, and the Beijing Exchange. However, the Shanghai index, which consists of stocks listed on the Shanghai Exchange, has a small decline because it mainly includes large state-owned companies, but private SMEs and technology stocks listed on the Shenzhen Exchange have a large decline.

2. Top 5 Market Cap Companies Representing Competitiveness Between China and Taiwan

Tencent (357.5 billion U.S. dollars, 465 trillion won) is China’s largest social media and game company. China’s largest baiju company Maotai (293.7 billion dollars), China’s largest bank Industrial & Commercial Bank (223 billion dollars), China’s largest e-commerce company Alibaba (193.1 billion dollars), and emerging e-commerce powerhouse Pinduoduo (192.9 billion dollars).

They are listed on different exchanges. Tencent is listed on the Hong Kong Stock Exchange, Maotai is listed on the Shanghai Exchange, and Industrial & Commercial Bank is listed on the Shanghai and Hong Kong exchanges at the same time. Alibaba is listed on the New York Stock Exchange and the Hong Kong Stock Exchange, while Pinduoduo is listed on the NASDAQ.

Among Taiwan’s listed companies, TSMC, the world’s largest foundry company, has the largest market capitalization. Its market capitalization amounts to 541.7 billion U.S. dollars (704 trillion won). Except for TSMC, there is a gap in market capitalization of other companies. MediaTek (51.5 billion dollars), the world’s fifth largest fabless company, came in second. Foxconn (46.6 billion dollars), Taiwan’s largest telecom carrier Junghwa Telecom (29.7 billion dollars), and Fubon Financial (27.1 billion dollars), a financial holding company.

TSMC’s market capitalization, which was only 124.2 billion dollars (161 trillion won) at the end of May 2016, has more than quadrupled to 541.7 billion dollars (704 trillion won), which means that TSMC’s position in the global semiconductor industry has expanded significantly. MediaTek also ranks first in the global mobile application processor (AP) market with a share of more than 30%, showing the competitiveness of Taiwanese semiconductor companies.

On the other hand, Tencent, the No. 1 market capitalization among Chinese listed companies, nearly quadrupled its market capitalization from $209.7 billion (273 trillion won) at the end of May 2016 to $818.9 billion (1065 trillion won) at the end of February 2021, but fell to $357.5 billion (465 trillion won), which is less than halving, on December 26. Alibaba, which ranked fourth, also saw its market capitalization surge from $202.9 billion (264 trillion won) to $650.3 billion (845 trillion won) during the same period, but shrank back to $13.1 billion (251 trillion won).

3. Chinese government’s anti-trust policy sent shares plummeting

What happened to China’s Tencent and Alibaba, which dominated TSMC until February 2021? The Chinese government’s anti-trust policy is the answer. Since the beginning of 2021, as the Xi Jinping administration has poured out anti-trust policies aimed at Internet companies, such as prohibiting private education and regulating the game industry, China’s big tech stocks have begun to plunge.

The Chinese government’s regulations on Internet companies are still ongoing. On the 22nd, Tencent, China’s largest game company, plunged 12.8% and NetEase 24.6% after the National Press and Broadcasting Bureau of China announced a draft of game regulations aimed at restricting charging, including setting user spending limits and prohibiting the provision of probability-based items.

The direct competitor to China’s big technology is not a Taiwanese company, but a U.S. big technology. They are seven large technology stocks, including Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta, which are called “Magnificent7.”

While these ‘M7’ have risen 75% this year, the gap between the U.S. and China is widening in technology competition as Chinese big tech companies are struggling. The Xi Jinping administration’s regulations on domestic Internet companies are also affecting national competitiveness.

Taiwan, on the other hand, is expected to continue its growth on the back of fever for semiconductor investment and booming artificial intelligence (AI) in the world including the U.S. Since President Tsai Ing-wen’s inauguration, Taiwan has been pushing for a new south-facing policy to reduce its dependence on China, while increasing its investment in ASEAN (Association of Southeast Asian Nations). Among Taiwan’s foreign investments in the January-November period, ASEAN accounted for 19.3 percent of Taiwan’s investment, surpassing China (11.5 percent) for the first time.

When you look at Taiwan, you think of the saying, “Small peppers are spicy.” China is unlikely to easily ignore Taiwan’s capabilities in confrontation over the strait.