Key Notes
- Taiwan will cut the daily borrowed-share short-sale limit from 30% to 3% starting November 9.
- Officials authorized the NT$500 billion stabilization fund to intervene as needed after a steep weekly selloff.
- TAIEX closed Friday down 4.51%, recovering from an intraday decline of about 9%.
Taiwan will sharply restrict short selling from Monday and has authorized its stock-market stabilization fund to intervene after a punishing week for AI shares pushed the island’s benchmark into a bear market.
The measures follow a 12.19% weekly decline in the TAIEX, its worst since 2001, Bloomberg reported. The government’s NT$500 billion stabilization fund, equivalent to roughly $15 billion, gives officials a potential source of buying as they try to restore confidence.
Friday’s session was more severe than the closing figure alone suggests. The index plunged as much as 3,737.67 points, or about 9%, to 37,837.05 before recovering to 39,701.64. It finished down 1,873.08 points, or 4.51%, rather than 9%. Taiwan’s Central News Agency described the intraday point loss as a record and the closing point decline as the fourth largest.
Short Sellers Face a Much Lower Limit
From November 9, the daily limit on intraday short-sale orders using borrowed securities will fall from 30% to 3% of a security’s average daily trading volume over the preceding 30 business days.
The Financial Supervisory Commission’s announcement also raises the minimum short-sale margin requirement for exchange-listed and over-the-counter securities from 90% to 130%. The changes make these bearish positions harder to establish by reducing permitted volume and requiring more collateral.
Specified market-making and hedging activities are exempt from the volume restriction. The package therefore preserves some transactions needed to support products such as warrants and exchange-traded funds, while tightening the limits facing other borrowed-share sales.
Regulators also broadened the collateral investors may use to cover margin shortfalls, subject to approval by their broker or securities-finance provider. Eligible assets can include foreign securities held through Taiwanese brokers. Companies were encouraged to consider buybacks and explain their operating performance to investors.
Stabilization Fund Gets the Go-Ahead
The fund’s management committee met at 2:30 p.m. Friday and authorized its executive secretary to deploy money as conditions require, according to the Finance Ministry’s statement. That decision gives officials authority to support the market; it does not establish that the full NT$500 billion has been spent.
The ministry cited a sharp deterioration in confidence and sustained foreign selling. Overseas investors sold a net NT$524.4 billion of Taiwanese shares in the first six days of November, covering the week’s five trading sessions.
By Friday’s close, TAIEX was about 20.55% below its October 6 high, the ministry said. A decline of at least 20% from a recent peak is commonly described as a bear market. The index remained below that threshold despite recovering almost 1,865 points from its session low.
The two interventions work through different channels. Trading restrictions constrain new bearish orders, while the fund can provide buying support. Investors selling shares they already own can still put pressure on prices, so tighter short-selling rules alone do not remove the source of every sell order.
TSMC Falls as AI Suppliers Lose Favor
Taiwan Semiconductor Manufacturing Co. (TWSE: 2330) closed Friday at NT$2,135, down NT$105, or 4.69%, according to exchange data. The shares traded as low as NT$2,020 before recovering some ground.
Taiwan’s losses were part of the Asian selloff that also hit Japan and South Korea. Manufacturers supplying the AI industry have been caught in a reassessment of how quickly vast investments in computing infrastructure will generate returns.
Central News Agency identified concerns over AI cash flow, possible changes to American data-center policy after the midterm elections and international fund withdrawals as factors behind the retreat. Those are risks to future demand and valuations, rather than evidence that every supplier has already lost orders.
The reversal has been swift. In mid-October, a 62% rally from the start of the year had put Taiwan among the world’s strongest major markets. Bloomberg’s report at the time described fund managers leaving traditional institutions to trade more freely for themselves.
Monday Brings the First Test
The restrictions take effect when Taiwan’s market reopens November 9. Friday’s cash-market prices remain the latest closing figures over the weekend.
Officials are trying to slow a retreat that erased 5,510.19 TAIEX points in a week. After a week of foreign withdrawals larger than the fund itself, bringing private buyers back is central to the rescue effort.
