Taipei: The Financial Supervisory Commission (FSC) has announced the removal of measures to limit short selling on the stock market, asserting that market conditions have stabilized following uncertainties brought about by tariff policies under the Trump administration.
According to Focus Taiwan, the FSC, Taiwan's top financial regulatory body, revealed in a statement on Friday its decision to lift these restrictions starting Monday, concluding over a month of imposed limitations. The measures were initially enacted on April 7, shortly after U.S. President Donald Trump announced extensive "reciprocal" tariffs on April 2, targeting countries with a trade surplus with the United States, which led to significant volatility in the equity market.
One of the key measures included reducing the limit of intraday sell orders for borrowed securities from 30 percent to just 3 percent of the average trading volume of the stock over the previous 30 trading sessions. The FSC has now restored this ratio back to 30 percent, effective Monday.
Additionally, the FSC had increased the minimum margin ratio for short selling on the Taiwan Stock Exchange and the Taipei Exchange from 90 percent to 130 percent. This ratio will also revert to 90 percent starting Monday.
According to the FSC, these short-selling curbs were instrumental in reducing market speculation and stabilizing the equity market. With stability achieved, the FSC believes it's time to allow the market mechanism to determine share prices.
While some restrictions are being lifted, the FSC had previously eased limits on the types of collateral that can be used to cover a margin deficit to lessen the financial burden on investors during market volatility. These eased collateral limits will remain in place despite the current market stability.
The FSC also noted it will explore the possibility of making these eased collateral limits a permanent measure and will consider other complementary strategies.
Following the announcement of the U.S. "reciprocal" tariffs, which included a 32 percent levy on Taiwan, local investors returned to the trading floor on April 7 after the Tomb Sweeping Festival holiday, leading to a significant drop of 2,065.87 points or 9.7 percent in the main board, closing at 19,232.35 in one session. The sell-off continued, pushing the Taiex to a low of 17,391.76 points on April 9.
However, after Trump announced a 90-day pause on the tariffs on April 9, global markets, including Taiwan's, began to recover. By Friday, the Taiex had only edged down by 0.09 percent, closing at 21,652.24, indicating a return to pre-tariff shock levels.
Despite the market's recovery, the FSC emphasized continued vigilance regarding U.S. tariff policies and geopolitical tensions, promising to implement measures to stabilize equity prices if necessary.
The National Financial Stabilization Fund, active since April 8 to mitigate market volatility amid tariff concerns, will continue to operate. Established in 2000, this NT$500 billion (US$16.67 billion) fund serves as a buffer against unexpected external disruptions to the local bourse.