Asia Pacific equities

21 August 2026, 04:02 UTC Chief Investment Office GWM Investment Research

Taiwan equities: Upgrade to Attractive Asia Pacific equities Authors: Allen Pu, CFA, CIO Equity Strategist, UBS AG Hong Kong Branch; Xueqiong Huang, Equity Strategist, UBS AG Singapore Branch; Delwin Kurnia Limas, CFA, CIO Equity Strategist, UBS AG Singapore Branch; Suresh Tantia, Head CIO Asia Equity Strategy, UBS AG Singapore Branch

• We are upgrading Taiwan equities to Attractive. Recent updates from leading foundry and global big tech names have provided greater visibility into sustained AI computing power spending.

• The robust demand for AI compute has created numerous supply-chain bottlenecks, benefiting Taiwan’s broader technology sector given the island’s strong data-center ecosystem.

• We expected Taiwan market to deliver 42% and 37% earnings growth for 2026 and 2027, respectively. While its current P/E valuation around 20x is elevated compared to its historical average, its earnings growth is also significantly higher. This dynamic results in a PEG Source: UBS ratio around 0.5-0.6x, which we see as very attractive

We are upgrading Taiwan equities to Attractive. Despite Taiwan has higher hardware/semiconductor the absence of a meaningful correction and strong year- exposure compared to other APAC markets to-date returns nearing 56%, recent updates—especially Market sector breakdown for APAC equity markets TSMC’s 2Q26 earnings and increased hyperscalers’ capex— have provided greater visibility into sustained AI computing power spending. This unprecedented demand for AI compute has created numerous supply-chain bottlenecks, not only in advanced chips but also in hardware components and manufacturing capacity, benefiting Taiwan’s broader technology sector given the market’s strong data-center ecosystem. Among emerging and APAC markets, Taiwan stands out as the largest beneficiary of ongoing AI infrastructure expansion, supported by its dominant position in the global technology supply chain and robust earnings momentum.

AI capex is set extend Taiwan's market rally Taiwan stands out as a key beneficiary of extended AI capex spending, given its market composition of Source: FactSet, UBS as of Aug 2026 67% semiconductors and 20% hardware. This substantial hardware exposure compared to other APAC markets provides Taiwan with greater resilience as investors grow cautious about the semiconductor sector following its strong year-to-date rally.

This report has been prepared by UBS AG Hong Kong Branch, UBS AG Singapore Branch. Please see important disclaimers and disclosures at the end of the document.

The ongoing investment in AI infrastructure and hardware The combination of strong profit expansion and reasonable ensures sustained demand for both semiconductors and relative valuations suggests that Taiwan can offer compelling related components, positioning Taiwan’s market to capture risk-adjusted returns. Investors can benefit from both the upside from global technology trends while offering a market’s growth potential and its ability to deliver superior diversified profile that can weather sector-specific volatility. earnings performance, even as valuations reflect optimism about the sector’s future prospects. We expect robust earnings growth in the Taiwan market, with forecasts of 42% for 2026 and 37% for 2027. This Key risks to our Attractive view strong momentum is driven by continued expansion in Geopolitical tensions across the Taiwan Strait remain a advanced technology sectors, particularly semiconductors key risk, with increasing military activity raising concerns and hardware. In the latest earnings season, we saw about potential escalation. However, we do not view multiple sub-sectors within semiconductor and hardware, this as an immediate threat, given Taiwan’s critical role including intellectual property (IP) providers, printed circuit in the global AI chip supply chain. Both sides are board (PCB) makers, and server hardware component likely to avoid overly aggressive actions, as disruption suppliers, set record highs in both revenue and gross margin. would have far-reaching consequences for the technology sector and global economic stability.…