Taiwan Stock Valuation Gauge Tops World as Chen Warns of ETF Risks

The Buffett indicator, which compares total stock-market capitalization with gross domestic product, is widely used to assess whether equity valuations have become detached from the underlying economy. Former Taiwan Premier Chen Chong said the island’s reading now ranks as the world’s highest, underscoring concerns that abundant liquidity and concentrated buying have pushed the market toward overheated territory and increased its vulnerability to a reversal.

Chen said recently that Taiwan’s Buffett indicator had surged to 475%, while rapid growth in active and leveraged exchange-traded funds was adding another layer of risk. He warned that if stocks turn lower, overlapping positions and crowded trades could force ETFs into mutually reinforcing selling. Portfolio disclosures by active ETFs may also invite copycat trading, potentially magnifying price swings and accelerating a market stampede.