Taiwan & Korea retail frenzy (with Rebecca Chung Wilkins)

AI-driven chip demand (TSMC, SK Hynix, Samsung) has created exceptional returns, drawing massive retail participation in Taiwan and Korea. Retail investors are using heavy leverage (margin loans, pledged-stock loans) and risky structured products. Foreign/institutional investors are selling into the rally, making markets fragile. A sudden shift in AI sentiment could trigger forced selling and contagion to global markets, though supply-demand dynamics remain tight through 2027.

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Charlotte Yang 4.5

Taiwan & Korea retail frenzy (with Rebecca Chung Wilkins)

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The AI-driven chip demand that powers the rally is expected to continue through 2027, supporting tech stocks globally. However, the heavy retail leverage and potential for a sentiment shift create downside risks.

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The KOSPI and TAIEX have experienced extreme volatility (8% drops followed by 8% gains). The Russell 2000 is not directly mentioned, but the contagion risk from Asian markets to US markets is highlighted.

Stock markets in South Korea and Taiwan have been on a wild ride with record highs and sharp drops. The KOSPI was down 8% two days in a row, then up 8% on the third day, then rallied to new highs.

Rebecca Chung Wilkins
Charlotte Yang

Korea's KOSPI index has nearly tripled over the past year and Taiwan's TAIEX has more than doubled. The rally comes down to AI. Tech giants are spending hundreds of billions on AI infrastructure, which runs on advanced chips made in Korea and Taiwan.

Companies like TSMC (world's largest foundry), SK Hynix, and Samsung dominate this segment.
Charlotte Yang

Retail investors think this is a once-in-a-generation rally. With property expensive and salaries not keeping up with inflation, they see the stock market as the best way to make quick money.

In Taiwan, many are borrowing heavily to buy more stocks. In Korea, some are turning to risky structured products.
Charlotte Yang

Markets are far more interconnected than before. The sharp 10% drop in KOSPI quickly filtered into Nikkei, Chinese markets, and ultimately into the US overnight session. A shock in Korea or Asia's tech sector can ripple through and affect US markets in ways people didn't anticipate.
Nvidia CEO Jensen Huang was spotted at a small stir-fry joint in Taipei, which has become a meeting place for Taiwanese investors. The stock market was down 3.5% that day but the mood was still upbeat.

Rebecca Chung Wilkins
Charlotte Yang

Stock trading has become a national pastime in Taiwan. Close to half a million people opened accounts to trade in the first half of this year. Many are first-time investors attracted by the prospect of getting rich quick.

If you bought a thousand shares of TSMC over the past year, you'd be making $41,000 - more than double the median annual salary in Taiwan.
Charlotte Yang

This rally is backed by fundamentals and strong earnings delivery. Unlike the dot-com era, the leaders of this AI rally (TSMC, SK Hynix, Samsung) are highly profitable with real technology edge and strong client demand that supply capacity cannot meet.

So long as that continues and valuation is not expensive, the rally has more to go.
Charlotte Yang

People are putting idle cash into stocks and borrowing from brokers via margin loans and unrestricted loans. They also borrow from banks via personal credit. Margin loans have surged 160% over the past 12 months and hit an all-time high.

Bank loan interest rates are about 2-3% annualized, while TSMC and popular ETFs generate 50% returns year-to-date.
Charlotte Yang

The biggest worry is a quick shift in global AI sentiment. Taiwan's market and economy are so tied to AI/tech (80% of benchmark is tech, 20% of GDP from tech). Any shift combined with rapid leverage buildup could easily cause very ugly selling.

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