Taiwan Stock Investment Blood and Tears History: How to Avoid Zhang Junning-Style Losses? TSMC and Foxconn Heavyweight Stock Trading Guide

A Cautionary Tale from a Single Case

Last year, a news story about well-known actress Zhang Junning’s losses in Taiwan stock investments drew widespread attention. This star, who holds a master’s degree, invested NT$60.16 million to buy a certain stock at NT$105 per share. When the stock price soared to NT$633 in March, she was temporarily hailed as an “investment expert,” with an estimated paper profit exceeding NT$100 million. However, markets are ever-changing; a single limit-down day in April resulted in a NT$39 million loss, turning her from a “stock market winner” into a retail investor chasing highs.

Her brokerage firm later responded by saying “investment is a personal act,” a vague statement that almost amounts to tacit approval of the authenticity of this investment. This case actually serves as a lesson to every investor: no matter how strong the upward trend, you must know when to take profits; once your profit target is reached, you should exit promptly, or else paper gains can instantly vanish.

The Core Logic of the Taiwan Stock Market

To avoid situations like Zhang Junning’s, first understand the characteristics of the Taiwan stock market:

The Truth About Foreign Institutional Control of the Market

Foreign investors account for about 40% of Taiwan’s total market capitalization. Their buying and selling trends often determine short-term movements. When retail investors chase highs and sell off, it’s often foreign institutions quietly offloading. Investors should develop the habit of checking official data from the Taiwan Stock Exchange or financial media (such as MoneyDJ, CMoney) for foreign investor activity. Continuous net buying by foreign investors may indicate institutional confidence; conversely, beware of signs of selling.

TSMC’s Weight Determines Market Direction

TSMC (2330) accounts for over 30% of Taiwan’s market weight, and any fluctuation in its stock price directly impacts the weighted index. That’s why many Taiwan stock investors closely monitor TSMC’s movements. Besides TSMC, major tech giants like Hon Hai (2317), MediaTek (2454), and UMC (2303) are equally important. Semiconductors and electronics are the fundamental sectors of Taiwan stocks, heavily influenced by US tech sectors (NASDAQ, Philadelphia Semiconductor Index).

Retail Investor Sentiment Drives Short-term Volatility

Retail investors make up over 60% of trading volume, meaning the market is easily driven by emotions. When a rally begins, retail investors rush in; when the trend reverses, panic selling becomes the main theme. Zhang Junning’s experience is, to some extent, a microcosm of retail chasing highs—only realizing too late that they are catching the last wave at the peak.

How to Build a Scientific Trading System

Practical Application of Technical Analysis

Many investors blindly bullish, unaware of when the market might reverse. Mastery of basic technical analysis can help you avoid these traps:

• Candlestick Pattern Recognition: “Head and Shoulders” signals a downtrend; “W Bottom” indicates a rebound opportunity. These classic patterns recur in Taiwan stocks. Learning to identify them allows for early positioning or exit.
• Moving Average Strategies: The 5-day, 20-day, and 60-day moving averages are key for short-term trading. When the price falls below the 60-day MA, it often signals a mid-term trend breakdown, and you should consider reducing holdings.
• Indicator-Assisted Judgment: MACD and KD indicators help determine overbought or oversold zones, suitable for entry or exit.
• Volume Confirmation: “Price rising + volume expanding” indicates a healthy upward trend; “Price rising but volume shrinking” signals weak rebound.

Fundamental Analysis Cannot Be Ignored

Short-term trading relies on technicals; long-term success depends on fundamentals. Investors should focus on:

• Profitability Metrics: Higher EPS indicates stronger earning power. The P/E ratio reflects whether the stock price is reasonable. Taiwan tech stocks typically have P/E ratios between 15 and 30; exceeding this range warrants caution for potential bubbles.
• Growth Tracking: For growth stocks (especially in AI, semiconductors), revenue YoY growth is a core indicator. Sustained revenue growth supports stock prices.
• Industry Trend Judgment: Semiconductors, AI, and electric vehicles are current main themes in Taiwan stocks. Additionally, green energy (wind, solar) and defense industries are emerging opportunities due to policy support.

The Absolute Importance of Capital Management and Risk Control

Zhang Junning’s NT$39 million loss fundamentally stems from poor capital management:

• Absolutely Avoid All-in on a Single Stock: Taiwan stocks are volatile; putting all your funds into one stock is akin to entrusting your fate to the market. Use diversification strategies, such as allocating 50% to blue-chip stocks for stability, 30% to growth stocks for gains, and keeping 20% in cash for flexibility.
• Set Hard Stop-Loss Points: Exit unconditionally when losses reach 7%–10%. Don’t cling to the hope of a rebound. The market won’t change direction based on your expectations.
• Be Cautious with Day Trading: Although Taiwan’s day trading offers tax benefits, high-frequency trading often leads to frequent losses. The fees saved do not compensate for the potential trading losses.

Conclusion

Zhang Junning’s Taiwan stock investment story ended in loss, but it is a valuable textbook for ordinary investors. The market always tests human nature; greed and fear alternate. Only by establishing a scientific trading system, strictly executing risk controls, and avoiding emotional decisions can you survive longer and go further in the Taiwan stock battlefield. Remember: preserving capital is always more important than chasing quick profits.