Taiwan’s stock market has doubled in the past year and it’s led to an incredible retail frenzy.
Bloomberg today writes about the market, which could be a stand-in for Korea or parts of the US market.
Andy Cheng is 26, unemployed and, with the help of a little borrowed
money, the proud owner of $60,000 worth of Taiwanese tech stocks. And in
many ways, he speaks for the entire island of 23 million people when he
doles out the following advice: “Buy any stock and you will make
money.”
There are some wild details:
- Many local brokerages have hit internal limits on margin loans and have had to ask for more collateral
- People who hit limits often turn to banks instead
- The Financial Supervisory Commission said leverage in the industry remains in check so far
Cheng in the report talks about how this rally is different than the dot-com boom/bust.
“This time it has substance,” he said.
*gulp*
Korea’s stock market was down 10% today as some of the air came out. Notably, it’s that tail that appears to be wagging the US dog today, preceding (if not precipitating) declines including double-digital losses in Micron and SanDisk.
Perhaps the most-scary details are about leverage with borrowing to buy stock markets hitting 160%, the most since the dot-com boom.
Here is another telling sign of the mood:
The vast majority of analysts at banks and brokerages predict more stock
gains in the coming months, including Goldman Sachs, which recently slapped a buy recommendation on the market.
You can never really predict when a party like this ends, but it always ends the same way and we’re getting a taste of it today. I will be very carefully watching Micron earnings on Wednesday because if there are any signs of a peak or even a looming peak in earnings, then it’s going to be a race to the exits.
Ultimately, I don’t think the big signal will come from the vendors but I suspect when one of the big spenders drops out of the AI race, it will mark the top.
This article was written by Adam Button at investinglive.com.
