Taiwan's benchmark stock index has surged past 42,000 points, driven by explosive AI demand and a wave of retail euphoria. Total market capitalization of listed companies has climbed above NT$148 trillion, making Taiwan the sixth-largest equity market in the world. For many investors the numbers feel like vindication. ForShih Jun-ji (施俊吉), they signal something far more alarming.
“This is distorted prosperity,” the former deputy premier told Storm Media in an exclusive interview. “The headline figures are real — but they are concealing deep structural vulnerabilities that most people simply do not want to see.”
Shih speaks with authority earned across decades at the center of Taiwan's financial system. An economist by training, he has served as chairman of Taiwan Financial Holdings, chairman of the Financial Supervisory Commission, chairman of the Taiwan Stock Exchange, and deputy premier.+
His tenure as stock exchange chairman from 2016 to 2017 was especially consequential. The reforms he championed — reducing the day-trading tax, introducing continuous auction and fractional-share trading, and broadening retail participation — helped lift market volumes out of a prolonged slump. He helped build the market now at record heights. And he believes it is heading for a reckoning.
A Gauge That Should Stop Investors Cold
The number Shih opened with was stark. As of this month, Taiwan's combined listed-company market capitalization has exceeded NT$148 trillion. Divide that by GDP of under NT$30 trillion, and the resulting “Buffett Indicator” — the ratio of total market cap to national economic output — stands above 500%.
To appreciate what that means, consider the U.S. benchmark: a Buffett Indicator of 200% is already regarded as historically elevated and a signal of extreme overheating. Taiwan's reading is more than double that.
But Shih was careful not to blame corporate performance alone. The more disturbing explanation, he argued, is structural. Taiwan's bond market remains underdeveloped — the product of decades of fiscal surpluses and infrequent government debt issuance. Foreign-exchange controls and currency volatility further restrict ordinary investors' access to international instruments. The result is that household savings have nowhere to go except equities.
"It's stocks, and nothing but stocks," he said. "That concentration of risk is not a sign of investor confidence. It is a structural trap."
Four hallmarks of a bubble
Shih identified four classic warning signs now visible in Taiwan's market: elevated valuations, high volatility, excessive concentration of capital, and what he called “defensive behavior” — the irrational social intolerance of dissent that tends to emerge in the late-cycle euphoria of a bull market.
The pattern is familiar from history. Collective enthusiasm first builds around a hot sector — internet stocks a generation ago, AI stocks today. As valuations stretch beyond any reasonable justification, criticism becomes socially unacceptable and anyone who raises doubts is attacked.
“Is this not precisely what we are seeing in Taiwan right now?” Shih asked.
TSMC has become something close to an article of faith. The chipmaker now accounts for approximately 43% of total market capitalization, and each NT$5 move in its share price shifts the broader index by about 40 points. When Shih served as stock exchange chairman, Foxconn still provided a meaningful counterweight. Today's concentration, he stressed, is entirely a function of U.S. AI hardware demand — it has nothing to do with the resilience of Taiwan's broader industrial base.
“This is an acutely fragile form of externally driven prosperity,” he said. “And anyone who says so publicly gets buried in online abuse.”
To illustrate how distorted the global picture has become, Shih drew on analysis by Greg Ip, chief economics commentator at The Wall Street Journal. Of the 2% GDP growth the United States recorded in the first quarter of 2026, AI hardware spending contributed 1.7%age points. Strip out chip and server imports — predominantly sourced from Taiwan — and genuine domestic U.S. growth falls to just 0.4%.
American growth, in other words, is being sustained by imports from Taiwan. The counterpart of that flattering U.S. headline figure is Taiwan's trade surplus, which has ballooned to an almost implausible 24% of GDP.
Taiwan's own first-quarter GDP growth came in at 13.69% — a figure that sounds, as Shih noted, almost nostalgic for the miracle-economy decades of the 1980s. But remove TSMC and its supply chain, and the picture for traditional industries and small and medium-sized enterprises is dismal.
“When a single industry is holding up the entire data set,” he asked, “what exactly is there to celebrate?”
NT$2.5 trillion transferred from workers to capital owners
Among the most sobering passages of the interview was Shih's account of distributive inequality — the quiet erosion of wages happening beneath the triumphant headline numbers.
Drawing on the framework of economist Thomas Piketty, Shih noted that forty years ago Taiwan's labor share of GDP stood at approximately 50%, roughly equivalent to the capital share. That ratio has declined steadily. It now stands at around 40%, while the United States and South Korea have maintained labor shares above 50%.
“That missing 10% represents NT$2.5 trillion that has been transferred from workers to capital owners,” Shih calculated. Distributed evenly across Taiwan's 24 million people, that sum would translate into an additional NT$100,000 in annual income per person. For a four-person household with two wage earners, it amounts to NT$200,000 a year that workers are no longer receiving.
Economic growth data, he argued, has become an illusion that workers can see but never taste. Taiwan's weak labor unions — in sharp contrast to South Korea, where Samsung workers have struck for a larger share — have left employees structurally disadvantaged. The government, he said, has chosen to look the other way.
Three psychological warning signs: TINA, FOMO and TACO
Shih mapped the irrational psychology now driving Taiwan's markets through three acronyms.
TINA (There Is No Alternative): Taiwan's lack of mature investment instruments, combined with a Buffett Indicator above 500%, means capital has no meaningful outlet other than equities.
FOMO (Fear Of Missing Out): The anxiety of being left behind has spread far beyond experienced investors. Even people with no prior investment knowledge are asking whether they should rush to buy on a dip.
TACO: Shih's wry riff on “it takes two to tango,” describing the market gyrations triggered by U.S. geopolitical decisions, the Iran situation, or the unpredictability of the Trump administration. Each rebound reinforces the dangerous belief that every pullback is simply a buying opportunity.
“That,” said Shih, “is the classic mentality just before a bubble breaks.”
“Pouring fuel on the fire”: The TSMC clause
Shih's sharpest criticism was reserved for the Financial Supervisory Commission's recent decision to raise the maximum weight a single constituent can carry in an exchange-traded fund from 10% to as high as 25% — a change universally understood to be designed around TSMC and referred to in markets as the “TSMC clause.”
“The purpose of government is to cool the market when it runs too hot, and to support it when it runs too cold,” he said. “That is what market stability means.” With TSMC already at dangerous levels of concentration, regulators have instead rewritten the rules so that more than thirty ETFs can legally increase their TSMC holdings.
The operational consequence, Shih argued, borders on absurd: ETFs will be forced to sell holdings in other companies in order to buy more TSMC at already elevated prices. Concentration grows further. “This is the precise opposite of what financial regulation is supposed to achieve,” he said. “It is pouring fuel on the fire.”
A 10% correction would erase NT$13 trillion overnight
To convey the concrete scale of what is at stake, Shih offered a calculation grounded in routine market behavior. A routine 10% correction applied to Taiwan's current market capitalization of more than NT$148 trillion would eliminate more than NT$13 trillion in household and institutional wealth.
“NT$13 trillion is roughly 50% of Taiwan's GDP,” he said. An asset shock of that magnitude would trigger a severe negative wealth effect, contracting consumption and risking recession. Shih drew an explicit parallel with China's property-market collapse and the prolonged deflationary spiral it produced — a warning that Taiwan is walking a similar tightrope of over-inflated asset values.
The case for regulatory discipline — and distributive honesty
Shih's assessment of the government's broader economic stewardship was unsparing. Fiscal policy has lost its function, he said, reduced to scattering subsidies for tourism, hotels and consumption vouchers that create only the illusion of benefit.
He called on the government to stop sheltering behind the 13.69% growth figure and confront the reality of a K-shaped economy in which the semiconductor sector's spectacular gains have left the rest of Taiwan's industries and workers behind.
For Shih, issuing these warnings is not an act of pessimism. It is an attempt to preserve some capacity for clear-headed judgment before the storm makes landfall. His final message was directed squarely at the FSC: return to the principles of regulatory professionalism and discipline — and stop adding timber to a burning building.
If the bubble inflated by the AI investment cycle were to collapse, the cost to Taiwan would be a destruction of national wealth that no one — not investors, not workers, not policymakers — could afford to bear.
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