Hướng dẫn nhanh về Chỉ số Trọng số của thị trường chứng khoán Đài Loan: Từ thành phần chỉ số đến đầu tư thực chiến

Many people have heard of the term “Taiwan Stock Market Index,” but they do not understand what it represents behind it. In simple terms, the Taiwan Weighted Index is a microcosm of the overall performance of stocks listed on the Taiwan Stock Exchange. It functions like a mirror, reflecting the overall trend of Taiwan’s stock market and economic conditions.

How is the Weighted Index calculated?

To understand why an index can represent the situation of thousands of companies, we need to first understand its calculation logic.

The essence of the market index is a weighted average. For example: a school is divided into a senior high school and a junior high school. The senior high has 200 students with an average score of 75, and the junior high has 100 students with an average score of 85. The overall school average cannot be simply calculated as (75+85) ÷ 2; instead, the student numbers must be considered: (200×75 + 100×85) ÷ 300 = 78.3 points. This is weighted calculation.

Applying similar logic to the stock market results in two calculation methods:

Price-weighted vs. Market-cap weighted

Price-weighted method’s most famous example is the Dow Jones Industrial Average. The operation is straightforward: sum the prices of all component stocks, setting a baseline value of 100 points.

Example: In a certain market, stock A is 300 yuan and stock B is 700 yuan on the base date, with a total of 1000 yuan, and the index is set at 100 points. The next day, stock A rises to 400 yuan, stock B rises to 750 yuan, with a total of 1150 yuan, and the index rises to 115 points.

The obvious drawback: stocks with higher prices dominate the index movement, while stocks with lower prices have less influence.

Market-cap weighted method is used by Taiwan stocks and the S&P 500, using the market value (stock price × number of shares) of listed companies as the weight. This approach is fairer — regardless of stock price levels, the market cap truly reflects influence.

Example: Market has companies X and Y. Company X’s stock price is 200 yuan with 10,000 shares issued, market cap 2 million; Company Y’s stock price is 50 yuan with 200,000 shares issued, market cap 10 million. Total market cap is 12 million, and the index is set at 100 points. One month later, X drops to 150 yuan (market cap 1.5 million), Y rises to 80 yuan (market cap 16 million), total market cap is 17.5 million, and the index rises to 146 points.

Practical considerations for index investing

Advantages

The Taiwan Weighted Index covers all listed common stocks, providing a comprehensive sample, able to reflect the overall market trend and Taiwan’s economic situation relatively completely, making it the most intuitive market thermometer.

Points to watch

Overweight of large companies Market-cap weighting causes large-cap companies (like TSMC) to have a much greater influence on the index than small and medium stocks. When big companies perform well, they can mask the struggles of other firms, misleading investment decisions.

Neglect of individual stock differences The index only reflects an average level; some industries or stocks may still rise against the trend when the market declines, and such structural opportunities are easily overlooked.

Over-concentration in certain industries Electronics stocks occupy a high proportion in Taiwan’s market, so the index tends to overly reflect the movement of such companies, weakening signals from other industries (like finance, consumer sectors).

Amplification of sentiment fluctuations Political news, foreign capital inflows/outflows, speculative trading, and other non-fundamental factors can be magnified in the index, causing short-term market overreactions.

Limited scope of listed companies The index only covers listed companies, not reflecting unlisted, small, or low-liquidity firms, thus unable to provide a panoramic view of Taiwan’s economy.

Lag in timeliness The index is updated periodically, but the market changes rapidly. Relying solely on the index in fast-moving markets may be a step behind.

Risk of single data point Focusing only on the index can lead to blind spots, missing the pace and phase differences among various sectors, and potentially missing structural opportunities.

Using technical analysis to understand the index

Technical analysis is based on historical prices to infer future trends. While it cannot predict the future with 100% certainty, it helps investors identify opportunities.

Analytical framework

The industry standard approach is top-down:

• Analyze major indices (S&P 500, Dow Jones, NASDAQ, etc.) for the overall direction
• Then look at industry levels, identifying the strongest and weakest sectors
• Finally, focus on individual stocks for selection

Specific technical tools

Grasp trend direction Observe with trend lines or moving averages. Continuous prices above an upward trend line, each correction not breaking previous lows, and each rally making new highs, are signals of an uptrend.

Confirm support levels Support levels are price zones where buyers are willing to enter, often causing rebounds when prices fall to these levels. Breaking support usually indicates the next decline, showing weakening bullish momentum.

Identify resistance levels Opposite to support, resistance levels are where selling pressure exists, often previous highs or technical lines. Breaking resistance is a bullish signal, favoring further upward movement.

Candlestick analysis A candlestick contains four prices: open, close, high, and low.

• From open to high reflects buying strength
• From high to close indicates selling pressure
• The final closing price is the last consensus between buyers and sellers

For example, if a day opens below the previous close, rises to the daily high (dominated by buyers), but closes near the opening price (selling reasserts), this pattern indicates waning bullish momentum.

Special situations

When major events (CEO death, terrorist attacks, political upheavals) impact the market, technical analysis may temporarily fail. In such cases, investors should pause trading and patiently wait for the market to regain rationality before re-entering.

How to participate practically in weighted index investment?

Main channels

ETF funds are the most common Passive funds do not actively select stocks but track the index trend. Returns are not very high but risks are relatively controlled, suitable for ordinary investors.

Futures and options Advanced investors can use Taiwan stock index futures or options for arbitrage or hedging.

Preparations before investing

Assess your risk tolerance All investments carry the risk of loss. Confirm how much fluctuation you can accept before deciding on the investment scale.

Understand component stocks High market cap companies have greater influence on the index. TSMC’s weight in Taiwan stocks is particularly high, making it a key target to track.

Pay attention to trading hours The Taiwan Stock Exchange operates Monday to Friday from 9:00 to 13:30 (GMT+8). Overseas investors should especially note the time difference.

Grasp macroeconomic background GDP growth, central bank interest rate decisions, inflation data, and other macro factors influence the index. Regularly reviewing this information is crucial for investment decisions.

Summary

The Taiwan Weighted Index is an entry tool to understand the market, but it is not万能. When using it to judge the market, it should be combined with industry analysis, individual stock research, and fundamental evaluation to make more robust investment decisions. Learning to read the index is the first step; understanding its limitations is equally important.