A plan under evaluation by the Financial Supervisory Commission (FSC) to allow stocks to fluctuate within a larger daily range could encourage investors to buy into small and medium-cap stocks, the GRETAI Securities Market (GTSM) said.
The GTSM, which operates the over-the-counter market, said that bigger stock market fluctuations are expected to bring more transactions into the local bourse, which is expected to help small and medium-cap stocks move higher.
Compared with the main board, stocks traded in the over-the-counter market are smaller in terms of capital size, and when turnover increases, it is easier for them to move.
FSC Chairman William Tseng (曾銘宗) last month said that the regulatory body is studying the feasibility of allowing stocks on the main board and on the over-the-counter market to go up or down by 10 percent in a single trading session, up from the current 7 percent limit.
The relaxed rules are expected to take effect in the second half of this year.
The GTSM also said that a move late last month by the legislature to postpone until 2018 a stock capital gains tax targeting major investors could prompt more local investors to come back to the trading floor.
Major local players tend to pick up small and medium-sized stocks in the local bourse, while foreign institutional investors favor large-cap stocks in the market.
GTSM chairman Wu Sou-shan (吳壽山) said that both developments are expected to gradually boost daily turnover in the local equity market.
He predicted that turnover would grow between 5 and 7 percent from a year earlier over the course of the year.
However, he added that investors should prepare for higher risks as the local bourse could be more volatile than before.
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