The government may eventually phase out a rule that prevents locally traded stocks to rise or fall more than 7 percent per day, in a bid to conform with international stock-trading practices, the nation's financial regulator said yesterday.
"The 7 percent daily limit has to go eventually," Financial Supervisory Commission Chairman Kong Jaw-sheng (龔照勝) told a year-end press conference yesterday.
Kong did not give an exact timetable for when the daily limit might be lifted, but said that the commission will temporarily suspend the limit for newly listed companies during the first five trading days after March 1.
"We'll see how the trial run goes before considering measures to permanently shelve the limit," he said.
The commission yesterday also announced that it is mulling supporting measures and mechanisms that would facilitate the Taiwan Stock Exchange Corp's (TSE) plan to further relax restrictions on stock trading, which was announced on Thursday.
The TSE said it plans to relax trading restrictions in the next six months and to scrap a ban on shares being sold at prices lower than their latest closing price.
But Wu Tang-chieh (
Once the ban is lifted, the regulator will also consider the possibility of suspending the stock's trading for a short period to prevent possible share-dumping by panicked investors, which may cause financial instability, said Jerry Huang (
As for a proposed delisting plan to delist penny stocks that show low transaction volumes over a specified period of time, Huang said it will be implemented by both the stock exchange and over-the-counter market in February.
The commission said it will continue to push forward further consolidation in the nation's financial sector. In October, President Chen Shui-bian (陳水扁) said the government hoped to reduce the number of financial holding companies by half to seven in two years, and to have each of the top three dominate at least 10 percent of the market.
"The commission's goal is to help develop one to three local financial institutions into regional players, which will enjoy the status of `national champion' banks," Kong said yesterday.
Kong said that the majority of banks need to grow if they are to remain competitive, while the remaining small banks can explore niche markets to survive.
While several banks have been secretly discussing merger deals, Kong said that such deals need chemistry to work. He declined to elaborate.
Kong advised Taiwan banks to develop fee-income businesses, as the banking sector is currently weak in launching innovative products to compete for fee-based deals while banks are waging throat-cutting price battles in the loan market, where profit is thin.
According to Kong, 78 percent of the local banking sector's revenues are derived from loans, while revenues from fee-based deals only accounted for 10 percent as of November.
He said that the commission would adopt a deregulatory approach to relax restrictions on the local financial markets, including a relaxation on the business scope of off-shore banking units while encouraging local banks to branch out into Asia-Pacific markets.