Trade-limit change still in the works

The Taiwan Stock Exchange Corp (TSE) said yesterday that it had not been instructed to defer a planned relaxation of the stock market's daily trading limit in September, in response to market speculation about a possible delay.

"We did not receive any instruction [to put off the plan]," TSE chairman Wu Nai-jen (吳乃仁) said in a phone interview yesterday.

The relaxation may still go ahead in September as scheduled, Wu said, without elaborating.

Premier Frank Hsieh (謝長廷) said on Monday after meeting with the Cabinet's financial and economic heads that financial authorities should more cautiously evaluate the original schedule to widen the daily trading limit to 15 percent from the current 7 percent in September.

Hsieh asked regulators to take into account the nation's financial and political stability, as well as non-economic factors overseas, and to formulate support measures before putting the loosening plan into practice.

"We can not see the exact time for implementation for the time being," local newspaper reports quoted Cabinet Spokesman Chou Jung-tai (卓榮泰) as saying yesterday.

In response, the Financial Supervisory Commission will in the near future hand over details of support measures to the Cabinet for review and finalize any necessary changes, such as those to computer systems, by the end of September, according to reports from the Central News Agency that cited the commission's vice chairman Lu Daung-yen (呂東英).

Lu was not available yesterday to confirm the reports.

Despite the concerns voiced by the Cabinet, the nation's institutional investors did not seem to be worried about the relaxation plan.

"We see the possible delay in carrying out the plan as a neutral factor to the stock market," said George Wu (吳裕良), a portfolio manager who helps manage the equivalent of a US$31 million of funds for Invesco Taiwan Ltd in Taipei.

The implementation is not expected to have an impact on the local bourse while a postponement is not expected to bring back a bull market, either, Wu said, adding that he thought the nation's stock market is mature enough to bear the change.

Charles Yeh (葉銀華), a professor at the Graduate Institute of Finance at Fu Jen Catholic University (輔仁大學), said that the new Cabinet's political concerns about the restructuring were understandable.

"After all, they would need to bear the blame from investors, who are also voters, if the stock market crashes," Yeh said.

However, since the loosening measures would benefit the local bourse in the long-run by encouraging the public to make more prudent investments and pushing the stock market toward international standards, "I would like to see at least the gradual relaxation [of the daily trading limit] to 10 percent from 7 percent in September," the academic said.

Alongside the loosening policy, the authorities can introduce support measures, such as speed bumps that delay program trading, trading halts for specific stocks or circuit breakers that allow trading to be suspended to prevent panic selling, Yeh said.