Since the enforcement of the short-selling restriction on April 7, the number of margin short sales in Taiwan's stock market has surged by 120,000, while retail investors retreat from margin financing. Among this wave, foreign investors heavily targeted 18 stocks, including Kai Fund, Quanta, and TSMC. With the dividend season approaching, market participants anticipate that the short covering trend will gain momentum as funds decrease and short sales increase, paving the way for future gains.

Sharp changes in Trump's tariff policies led to a U.S. court temporarily allowing a return, resulting in a drop across Asia's stock markets on the 30th. Zhu Chengzhi, chairman of Wanbao Investment Consultancy, pointed out that Taiwan's stocks experienced selling pressure ahead of the Dragon Boat Festival, leading to six consecutive black K sticks, with a year-to-date decline of 7.33%, while the OTC market dropped 11.2%. In contrast, the South Korean stock market and the Nasdaq 100 are performing well, leading Zhu to suggest that the Taiwan stock market should experience a rebound.

Although the short-selling restriction ended this week, statistics from April 7 to May 29 indicated that the number of short sales surged by 119,165 or 55%. During the same period, margin financing decreased significantly by NT$104.9 billion, with reductions exceeding 26% in both markets. There were over 500 stocks during this period where fund reductions corresponded with increasing short sales, with foreign investors net buying over 12,000 shares in Kai Fund, Quanta, TSMC, Tatung, and Inventec.

Chen Yiguang, chairman of Fubon Investment Consultancy, noted that with about half of listed companies having held their shareholder meetings in May, the market is entering a concentrated dividend period, and the short sales will face a buyback pressure. Additionally, with a significant reduction in margin financing, the market's liquidity will be cleaned up, creating an environment favorable for short covering. Statistics indicate that, over the past decade, Taiwan stocks have recorded increases in June seven times, with an average increase of 1.23%, suggesting a continuation of the upward trend from May.

Zhu believes that despite the fluctuating stance of the U.S. courts on tariffs, future negotiations on tariffs between Trump and other countries will become increasingly difficult. Currently, Taiwan stocks are hovering around 21,300 points, suggesting a bullish trading strategy. Furthermore, the impact of the COMPUTEX Taipei International Computer Show is becoming evident, with Morgan Stanley upgrading this year's AI server shipment forecast. Quanta, Hon Hai, and other key suppliers are benefiting, while NVIDIA's favorable earnings have created positive market prospects for TSMC, Inventec, Kinsus, and Taiflex, all benefiting from AI.

Industry experts indicate that as the market stabilizes, small- and mid-cap stocks, along with high-priced stocks, are anticipated to lead the short covering trend. Stocks such as Unimicron, Fu Jiao, Qihong, Kinsus, and Taiflex have all seen price increases of about 30 to 40 percent, marking the quiet commencement of the short covering trend.