Financial Supervisory Commission Chairman William Tseng (曾明宗) yesterday expressed confidence that stock market turnover would gradually pick up amid concern over sluggish trading.
Daily turnover reached only NT$69.27 billion (US$2.1 billion) yesterday following Monday’s NT$75.67 billion.
Tseng said that the tepid daily turnover would be even lower if the commission had not lifted the ban on short selling on Monday.
He said that the commission had heard the opinions of financial experts and decided to lift the prohibition on selling shares at less than the previous day’s close.
“Turnover will recover gradually as measures impeding market mechanisms are lifted,” he said at a routine press conference.
“The ideal turnover should be about NT$115 billion each day, which was the average recorded in July and August,” he said.
While it is impossible to predict the pace of recovery in market turnover, he said that net capital inflow by foreign institutional investors has picked up, from US$194.1 billion on Sept. 9 to US$194.9 billion on Friday last week.
Tseng said that the commission needed to further observe if foreign capital inflow would return to the peak of about US$204.8 billion in May.
On lowering the minimum margin for short sales back to 90 percent from 120 percent, a measure that took effect alongside the short-selling ban on Aug. 24, Tseng said that the change would require the approval of the central bank.
“It is a matter of legal compliance, as the change is related to the nation’s money supply,” Tseng said.
He also said that the precipitous 290-point drop on Monday was caused by a major slump in the US market on Friday last week.
“The trend is in line with the performance of Taiwan’s peers in Asia, with Australia falling by 2 percent, South Korea by 1.6 percent and Hong Kong by 0.7 percent on that day,” Tseng said.
The TAIEX closed up 0.71 percent at 8,365.92 points yesterday.
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