The Financial Supervisory Commission yesterday raised the minimum margin maintenance ratio for short sales from 90 percent to 120 percent, the second increase since August last year as global markets are once again gripped by a surge in volatility.
The measure comes into effect today.
“We urge investors to stay calm and make rational decisions in the face of drastic changes to global equity markets,” Securities and Futures Bureau Director-General Wu Yui-chun (吳裕群) told a news conference.
The TAIEX yesterday continued to slip, shedding 1.73 percent to close on 7,852.06 points, following a 1.05 percent plunge on Wednesday.
With turnover expanding to NT$116.775 billion (US$3.483 billion) yesterday from NT$98.454 billion the previous day, there is no liquidity risk on the local bourse, Wu said.
Wu said the local stock market was under pressure amid a plunge in Chinese stocks and concern over the falling yuan.
The TAIEX was beset by domestic factors as heavily weighted electronic components suppliers were hard-hit by dwindling sales prospects for Apple Inc’s products, he said.
To help investors cope with widening market fluctuation, the commission eased regulations to allow brokerages to give clients more leeway before a margin call is executed.
“Brokerages may now choose to delay margin calls or develop alternative arrangements based on their assessment of each client’s financial situation,” Wu said.
He said that in times of heightened volatility, a buffer would help prevent deepening of investment losses by averting hasty liquidation of equities or other assets.
Minister of Finance Chang Sheng-ford (張盛和) said the NT$500 billion National Financial Stabilization Fund (國安基金) remained in the market to help support share prices.
In addition, other government-led funds — such as the labor pension fund — and government-invested banks have also entered the market to help buffer against the negative effects of heavy losses in the global market, Chang said.
Only a small fraction of the financial stabilization fund has been used to pick up local shares so far, Chang said.
He declined to disclose the exact amount.
In light of the market turmoil in China, Bureau of Banking Director-General Austin Chan (詹庭禎) said that following numerous crackdowns by the commission, concern over yuan-linked target redemption forwards are expected to be fully lifted by the end of the first half of this year.
“About half of active target redemption forwards are expected to expire by the end of next month, while overall exposure to the derivative instrument is now contained at a manageable level,” Chan said.
Interest in the instrument among the public has receded markedly, Chan added.
Total target redemption forwards receded to about NT$82 billion at the end of last year, compared with NT$160 billion in May 2014 during the height of the troubled instrument’s popularity, he said.
As of the end of November, total exposure of domestic banks to Chinese stocks was tallied at NT$2.74 billion, according to banking bureau data.
Additional reporting by CNA
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