The last time margin debt in Taiwan looked like this, the dot-com bubble was about to pop. Total margin borrowing has now surpassed $13B, a threshold the island nation’s stock market hasn’t crossed since September 2000. The fuel behind the fire: a retail investor frenzy centered on TSMC and the broader AI trade.
Taiwan’s benchmark Taiex index has surged to levels not seen in a quarter century, and TSMC, the chipmaker that fabricates processors for virtually every major AI company on the planet, accounts for over 40% of the index’s weighting. When TSMC moves, the entire Taiwanese market moves with it.
The margin debt problem
The pace of borrowing in Taiwan has been staggering. In a single day during late May to early June, margin debt spiked by approximately NT$21.3B, roughly $680M. That’s not a gradual buildup. That’s retail investors collectively slamming the accelerator.
Brokerages have noticed. Several are now hitting their internal lending limits, which has forced them to raise collateral requirements and bump up interest rates on margin loans.
