A Broad Selloff Is Not Yet the Time to Buy the Dip: Margin and Foreign-Investor Conditions Are Still Unmet
TL;DR: Taiwan stocks sold off across the board and 100 strong stocks hit limit-down, but margin balances and the index decline are still in the orange zone, not the blue zone where historical bottoms have formed, so host Boss Lei urges against rushing to buy the dip: foreigners have net sold nearly 1.5 trillion since October, and he wants conditions such as a single-day margin drop of more than 100億 and foreigners turning to net buying of 500億.
Key ideas
- Margin-call liquidations often produce a short-term bottom, but yesterday margin fell only a little, far less than the day before; with 100 strong stocks limit-down and the margin maintenance ratio near 120%, it was only the second day of forced liquidation, so there is no need to chase the exact low.
- To judge whether the decline has stopped, compare the margin drop with the index drop: when the gap flips from positive to negative, margin has retreated more than the index and the market enters the blue stage; in 9 of 10 historical bottoms margin was flushed out at the same time, and the market is still in the orange zone.
- The conditions announced on October 20 include stabilized market chip flows, the US market holding a short-term bottom for three days without breaking, Japan and Korea rising together, oil back below 100, and foreigners turning to net buying of 500億; only oil has been met so far, and without the conditions he does not raise his cash-to-stock exposure.
- A rebound is confirmed by conditions such as the index closing above the previous day's high, the Taiwan dollar breaking above 32, Japan and Korea recovering their prior highs, and TSMC returning to 2400, and three of them must be met; only oil has been met, and he admits he did not expect the market to be so weak once it broke the quarterly moving average.
- When the whole market is green, many stocks' margin maintenance ratios are already below 110, a level that has historically rarely been broken, so this may be near the end; money is still interested in TSMC, MediaTek and other key players in an index rebound, but he still waits for a bottom and for three conditions to be met before acting.
Section summaries
0:05Short-Term Bottoms Often Follow Margin Liquidations
When everything is limit-down, margin calls force out the people who least want to sell; once the loose, speculative shares are cleared, a short-term bottom tends to form. But yesterday margin fell only a little, far less than the day before, and he expects the liquidation low from this Friday to next Monday to be brief, so he still is not rushing to buy the dip.
▶ Watch from here11:05Waiting for Signals and Watching the Exchange Rate
He signaled yesterday that he was not that optimistic and wanted to wait one more day: after such a large drop, whether you catch the exact low does not matter. Foreigners net sold more than 1400億 yesterday and another 1100億 today, and the Taiwan dollar is still weakening; whatever analysts say about the central bank certainly intervening, he looks only at objective data, and the money is simply being pulled out.
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12:55Charting Software and the Pre-Market Routine
The shop manager shares his customized charting software, with telecom stocks on the front page and bank stocks on the back page; when money flows into telecom and financial defensive plays, he lowers his exposure. Before the open he first checks international indices, futures and sector money flows, and lists stocks by margin maintenance ratio to gauge risk.
▶ Watch from here16:15Second Day of Liquidation and the Margin Decline
Today 100 strong stocks hit limit-down and the margin maintenance ratio fell to around 120%, the second day of forced liquidation; foreigners have net sold nearly 1.5 trillion since October. His signal requires a single-day margin drop of more than 100億 to count as enough, and a decline of two or less to be in the safe range.
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22:35The Gap Between Margin and Index Declines
Comparing the margin decline with the index decline, a gap that flips from positive to negative means margin has retreated more than the index, entering the blue stage; in nine of ten historical bottoms margin was flushed out at the same time, and the market is still in the orange zone, so the decline is not over until the blue zone.
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27:05Signal Conditions and Exposure Management
He reviews the signal conditions from October 20: stabilized market chip flows, the US market holding a short-term bottom for three days without breaking, Japan and Korea rising together, oil back below 100, and foreigners turning to net buying of 500億. If the conditions are not met he does not add exposure, and those holding half their capital in stocks can wait for the bad news to be fully priced in.
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29:30Rebound Conditions and Patient Positioning
He repeatedly restates the pre-agreed points he wrote down, such as foreigners buying 500億 in a single day; on October 30 he raised his exposure for the first time, but afterward did not dare add more, and it has been hard to stay patient. His rebound conditions include the index closing above the previous day's high, the Taiwan dollar breaking above 32, Japan and Korea recovering their prior highs, TSMC returning to 2400, and oil back near 100; three must be met to confirm a rebound, and only oil has been met so far.
▶ Watch from here30:25A Weak Market and Foreign Selling Pressure
The index has never recovered the key line for two days in a row, and he admits he did not expect the market to be this weak once it broke the quarterly moving average, which is why he wrote down objective conditions to bind himself. The biggest enemy is foreign investors, who hold a lot of stock; conditions such as foreigners buying 500億 are still unmet, so he must keep being patient.
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33:15The Japan Fire and a Chance for Order Transfers
A fire broke out at Panasonic's Hukou plant, and if it cannot resume operations soon, the gap of about 4% of global supply can only be shifted to Taiwan; he jokes that Japan and Taiwan are good friends and they will come eat at Din Tai Fung. But imitating the foreign investors' attitude, he says "foreigners disagree": they sell Japan's CCL (copper-clad laminate) makers, and Taiwan's leading stocks are sold along with them.
▶ Watch from here34:40Holding the Line on Exposure and Waiting for Conditions
He stresses again that you should not buy the dip when the conditions are unmet: when making the show he would rather not sign up members than give everyone reckless hope. He mentions that he was laughed at after painfully selling Taiwan Glass, but still held to his exposure level, and he thanks viewers who came back because they agree with this approach.
▶ Watch from here38:15Falling Oil Prices and Inflation Concerns
At least one thing has come down first: West Texas and Brent crude have fallen quickly. But he warns against being too optimistic, because it will be harder for oil to keep falling all the way back to the low 80s; a war that has happened has happened, and the damage is hard to undo.
▶ Watch from here40:00Market Panic and How to Handle Individual Stocks
With the whole market green, many stocks' margin maintenance ratios are already below 110, and he says below 110 has historically rarely been broken, so this may be near the end. The selling-pressure ranking shows almost no high-priced stocks, which means the selloff does not distinguish good from bad. Stocks such as Global Unichip and Unimicron are well regarded, but he suggests waiting for a bottom, and he will tell everyone publicly when the three elements are met.
▶ Watch from here41:10Money Flows and Key Players in a Rebound
The chip radar shows money is still interested in TSMC, MediaTek and similar stocks, because they are an important part of any rebound in the weighted index and have good fundamentals; Taiyo (台燿) is still seen as cheap, and some keep buying it. He says he has no objection to any of these fundamentals-based reasons for buying.
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