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the higher the expectations, the faster the price will fall when they are fulfilled!

just before the fed's interest rate decision was released, asia-pacific stock markets plunged this afternoon. the taiwan weighted index turned positive from a high in the morning to a sharp drop of more than 1% in the afternoon. at the same time, the nikkei 225 index rose 1.3% in the morning and turned green in the afternoon. so, what happened?

first, the yen appreciated sharply again today after a sharp drop last night, and asia-pacific currencies also rose across the board. this seems to reflect the expectation of a 50 basis point rate cut by the federal reserve. however, if this is true, the reversal of carry trades may once again affect the equity market.

secondly, from a structural perspective, analysts pointed out that the current iphone 16 pre-orders are not as expected. hon hai's stock price plummeted by more than 4% today. hon hai's stocks also showed a trend of more declines than increases, and tsmc's performance in the us stock market last night was not optimistic.

diving

today, the trend of the asia-pacific market is somewhat surprising. because the us stock market did not fall sharply last night, and the expectation of the fed's interest rate cut is also very strong. in this context, the equity market should have a certain performance. however, this morning, the taiwan weighted index once surged, but the trend was weak, and it plunged in the afternoon, and the decline once expanded to more than 1%. as of the close, the index fell 0.8% to 21678.84 points. the nikkei 225 index rose by more than 1% in the morning, but turned green in the afternoon.

so, what is the reason? analysts believe that there may be two main reasons:

first, the japanese yen surged this morning, rising 0.7% to 141.41, the highest among major asia-pacific currencies. most non-us currencies followed suit.

in the long run, the bullish trend of the yen is becoming more and more clear, and the impact of carry reversal transactions may still exist. at present, the interest rate differential between the united states and japan has been greatly reduced to below 3.5%; leverage operations are becoming increasingly tense. the yen is the world's largest financing currency. many people will borrow yen to invest overseas. as various uncertainties increase, investors who borrow yen to go long in the stock market are nervous. in addition, the bank of japan will continue to raise interest rates, raising financing costs. the bank of japan's tightening policy has greatly reduced the scale of bond purchases. the yen may not be as weak as before.

the second is the structure. at present, the market generally believes that the pre-order orders for iphone 16 may not be as expected. tianfeng international analyst ming-chi kuo said that the pre-order sales of the iphone 16 series in the first weekend are estimated to be about 37 million units, which is about 12.7% less than the first weekend sales of the iphone 15 series last year. the key is that the iphone 16 pro series is lower than expected. this caused hon hai's stock price to plummet today, and hon hai's stock price also fell more than it rose. in addition, tsmc adr fell 1.02% on tuesday, falling for two consecutive days during the mid-autumn festival, a drop of 3%. tsmc opened lower on wednesday, falling nearly 1.5% at one point.

subsequent expectations

so, what are the subsequent expectations for the taiwan stock market?

first of all, from a structural point of view, the trend of the taiwan stock market basically depends on the trend of electronic stocks. guo mingchi pointed out that the delivery time of the iphone 16 pro series is significantly lower than that of the iphone 15 pro series. in addition to the increase in pre-order inventory, the year-on-year decrease in sales in the first weekend is mainly due to lower-than-expected demand.

however, there are different voices. wu yuezhan, an analyst at asia securities investment consulting, said that apple sells about 200 million mobile phones a year, and this new phone is mainly targeted at iphone 12 and 13 users. the goal is to attract a wave of phone replacements, and a total of 800 million mobile phones have been sold in four years. this time, attracting about 30% of the replacements will meet the target, so there is no need to be pessimistic. wu yuezhan also said that apple is currently in a leading position and does not need products with explosive performance, especially since users have always had the characteristics of delayed demand, such as smartphones, 5g and other technologies. apple’s launch of ai phones this time is not to sweep the market. the next iphone 17 to be launched will be an important observation point.

secondly, the fed's expectations for rate cuts. currently, traders in global financial markets are waiting for the fed to cut interest rates on wednesday, and are facing great uncertainty, which may lead to a series of market fluctuations. although financial markets expect that fed policymakers are likely to start an easing cycle with a 50 basis point rate cut, major brokerages still expect the fed to cut interest rates by 25 basis points at the end of the two-day monetary policy meeting. some analysts pointed out that although the fed's resolutions often affect the market, traders' expectations for the fed's rate cuts of 25 basis points and 50 basis points are relatively balanced, so no matter what measures the fed takes, it may surprise traders. deutsche bank even analyzed that the fed may create the biggest surprise in 15 years.

it is worth noting that the us dollar interest rate will affect the foreign exchange market, thereby expanding the range of fluctuations to the equity market. francis tan of ca indosuez wealth management said that the yen is still undervalued against the us dollar and believes that there is room for further appreciation of the yen, and the unwinding of carry trades has not yet ended. last month, the rise of the yen, driven by the bank of japan's interest rate hike, severely hit the carry trade in emerging markets and triggered the worst drop in the nikkei 225 index since 1987. there are similarities this time. investors are divided on whether the federal reserve will start its easing policy by cutting interest rates by 50 basis points. on the one hand, a 50 basis point rate cut may raise doubts about the health of the us economy, triggering a sell-off in emerging asian assets. this may also drive the yen stronger, prompting investors to unwind risk asset carry positions based on yen financing; on the other hand, a 25 basis point rate cut may be beneficial to the stock market, and emerging markets in asia pacific may be the main beneficiaries.