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Steel stocks diverge! Dacheng Steel surges but then retreats, while China Steel surges to a two-month high.
industry6 months before
Summary：The Taiwan Stock Exchange surged 330 points, driven by TSMC and Formosa Plastics Group. Steel stocks became a focus of the market due to Trump's doubling of steel and aluminum tariffs. Although Dacheng Steel was the biggest beneficiary, it was heavily sold by foreign investors and Tainan cliques. Instead, funds poured into China Steel, which saw a rare 3.9% surge. Investor sentiment shifted from chasing gains to cautious investment. #Dacheng Steel #TrumpTariffs #SteelStocks #ForeignInvestmentMovement #ChinaSteel
Taiwan stocks surged, with steel stocks seeing unexpected gains
On July 23rd, the Taiwan Stock Exchange surged 330.75 points to 23,318.67, thanks to a late-day rally by TSMC and a simultaneous rally by Formosa Plastics Group. The three major institutional investors collectively bought 18.098 billion yuan, of which foreign investors bought 8.431 billion yuan for seven consecutive days, proprietary traders bought 10.716 billion yuan, and investment trusts sold 1.049 billion yuan.
However, the most eye-catching sector on the market wasn't tech, but the steel sector. Former US President Trump signed a proclamation on June 3rd, raising tariffs on imported steel and aluminum products from 25% to 50% (Source: US Presidential Proclamation). This immediately ignited steel stocks, particularly Dacheng Steel, which is deeply tied to the US market and was once seen as the biggest beneficiary.
Dacheng Steel's stock price didn't rise despite the favorable news. What's the reason behind this?
Dacheng Steel has long focused on the US market, with its annual report clearly stating that "the US is its primary sales region." Its subsidiary, Ta Chen International Inc. (TCI), is the largest importer and wholesaler of stainless steel in the US. Its acquisitions of ERI in 2017 and Alcoa's factories in 2018 have rapidly increased its aluminum market share. Brighton-Best International (BBI-USA) also maintains its position as the largest wholesaler of industrial standard fasteners in the US (data source: Dacheng Steel financial report).
Logically, Trump's doubling of tariffs would significantly protect domestic production in the United States, and Dacheng Steel, with its "Made in the USA" label, should have benefited from this policy. However, the actual stock price performance was surprising. After hitting intraday highs near 37 yuan on the 22nd and 23rd, it retreated, fluctuating between 35 and 36 yuan at the close, leaving a noticeable upper shadow, indicating that investors were taking profits at high levels.
The reason is that after a series of large purchases of Dacheng Steel on the 21st and 22nd, foreign investors suddenly turned to net selling on the 23rd, totaling 5,500 contracts. Meanwhile, branches of Land Bank of Tainan, SinoPac Financial Holdings, and Guopiao Bank (Taiwan) sold a combined 9,000 contracts. The market generally believes this is related to the Tainan location of parent company Dacheng Steel and the flight of funds from the region (data source: brokerage branch trading).
Sinosteel unexpectedly took over, and funds shifted to more stable targets
When Dacheng Steel encountered selling pressure, foreign investors began buying China Steel shares in large quantities, reaching 28,000 shares in a single day, making it the top-buying steel stock. This boosted China Steel's share price by a rare 3.9% to close at 20 yuan, a two-month high. On the same day, Zhonghong even hit its daily limit of 16.05 yuan. Market funds are clearly rotating within the steel sector, prioritizing leading stocks with low volatility and solid fundamentals.
Judging from investor sentiment, short-term traders are cashing in on gains in Dacheng Steel and are worried about the disorganization of their chips; while medium- and long-term funds are turning to targets such as China Steel, which have stable revenue and industry leadership, to take advantage of Trump's new policies to find medium- and long-term investment opportunities.
Market Outlook and Investor Sentiment
Trump's tariff policy undoubtedly benefits US companies with well-developed production capacity in the short term, particularly Dacheng Steel, which has factories and distribution channels in the US. However, the positive news has already been reflected in advance, and the stock price has come under pressure after a short-term surge. This rapid shift in capital reminds investors that while policy-related news can drive short-term trading enthusiasm, the true winners are often leading companies that can achieve stable long-term profits.
If US steel and aluminum demand continues to rise due to tariff protection, leading domestic steel companies like China Steel and Zhonghong Steel may benefit further. Investors should closely monitor the pace of foreign investment and subsequent capital flows into the steel sector, avoiding blindly chasing short-term theme stocks.
Taiwan's steel market has entered a period of rapid capital rotation. Who will be the ultimate winner under Trump's new tariff policy?
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