With Taiwan's stock market holding above 48,000 and continuing to set records, veteran analyst Tu Chin-lung is bullish on the index advancing to 80,000 over the long term and on TSMC reaching NT$3,000 to NT$5,000 — but he also warns that a correction on the order of 10,000 points could come in May next year.

• Tu maintains his long-term view of 80,000 for Taiwan stocks, using a rise in TSMC to NT$5,000 as the basis for the estimate.
• He identifies May next year as a "55-month time turning point," at which point he plans to cut his equity holdings from 65% to between 30% and 50% to avoid a pullback of more than 10,000 points.
• On short-term rhythm, the third quarter is usually the weakest and September tends to see the low, while the probability of gains rises to just over 60% in the fourth quarter and closer to 70% in the first quarter of next year.
• Fundamentals are still holding up: earnings growth for listed and OTC companies is estimated at 60% this year, with nearly 30% more next year.
• The pressure comes from interest rates — the US 10-year Treasury yield briefly surged to 5.22%, its highest since 2007, and liquidity has clearly tightened.

Outlook: Some short-term volatility after the Mid-Autumn Festival holiday is unavoidable, but earnings growth and the year-end "dream" rally still tilt the picture bullish; the real test does not come until May next year.