Taiwan’s TAIEX broke the 30,000-point mark even as China staged major drills around the island. Here’s the market logic: semiconductors and AI demand, geopolitical risk already priced in, and domestic capital leading the rally.
Taiwan’s stock market reaching the 30,000-point milestone looks counterintuitive when set against Beijing’s intensifying military pressure. Yet the surge is explainable once you separate security headlines from earnings power, capital flows, and how markets price risk.
TAIEX crossed 30,000 in early January 2026, led by heavyweight tech names—especially TSMC—as investors continued to price in Taiwan’s central role in the global AI supply chain.
Reuters’ longer-form market reporting ahead of the milestone also framed the rally as structurally supported by AI-related demand and Taiwan’s position across key AI hardware supply chains, not as a short-lived momentum spike.
Market implication: when index leadership is concentrated in globally dominant exporters with strong earnings visibility, macro-security shocks often need to be extraordinary and immediately trade-disruptive to override the earnings narrative.
China’s large-scale drills have become frequent enough that investors treat them as part of the background risk environment rather than a new information shock. Taiwan’s defense minister publicly warned about the public “becoming numb” to drills, reflecting how persistent the pressure has become.
On the China side, Reuters described major live-fire drills around Taiwan at the end of December 2025, including blockade-rehearsal elements, which were widely condemned internationally—yet markets still moved higher days later.
Market implication: when a risk is chronic and repetitive, it tends to be embedded in valuations and hedging behavior. Prices react less to the fact of drills and more to signals of escalation that would plausibly disrupt trade, shipping lanes, or production.
The most widely reported major drill episode in this window peaked in late December 2025, while the 30,000 milestone was recorded in early January 2026.
That timing matters because equity markets often “snap back” once an event passes without immediate economic interruption—especially when investors were already positioned for an early-year tech-led rally.
Even on the day TAIEX crossed 30,000, reporting showed foreign institutional investors were net sellers, implying the marginal buyer was significantly domestic.
Reuters also reported sizeable foreign outflows during 2025 even as the market’s structural AI thesis remained intact—another sign that local participation and positioning can keep the index resilient.
Market implication: when domestic capital is confident in the sectoral story (AI/semis) and the currency/interest-rate backdrop is supportive, markets can grind higher even if foreigners de-risk.
Equities tend to discount the most probable path. Unless drills translate into sustained disruptions—sanctions shocks, shipping insurance spikes, export controls escalation, production interruptions—markets revert to fundamentals: earnings, guidance, and global demand cycles. Reuters’ coverage of Taiwan’s macro stance noted confidence on growth alongside discussion of market heat and AI-bubble concerns—i.e., the debate is about valuation and cycle, not imminent shutdown.
Paradoxically, Taiwan’s role as a core node in global AI infrastructure can compress perceived risk because investors believe the ecosystem is too consequential to be easily substituted. That doesn’t remove geopolitical danger; it changes how capital assigns probability to severe, near-term disruption.
Author: Cathy Lin