Financial Supervisory Commission (FSC) Chairman William Tseng (曾銘宗) might do what his predecessors had wanted to do for the past two decades — expand the daily trading band of local stocks to brace for intensifying competition in Asia, such as China’s Shanghai stock market.
The commission on Monday said that it was seriously considering raising the daily 7 percent limit to 10 percent by the second half of next year.
That is the latest in a slew of short-term deregulation measures the commission has introduced to prop up local stocks since Tseng took office in September last year.
This is not the first time the financial regulator has considered widening the long-standing daily trading limit.
Former Taiwan Stock Exchange Corp chairman Schive Chi (薛琦) in 2000 urged the regulator to lift the fluctuation limit to 10 percent. However, his efforts came to nothing amid widespread skepticism and a faltering global economic recovery from the financial meltdown in 2008.
On Saturday, Tseng brought up the issue again and made widening the trading band one of his mid-term missions to revive the local stock market.
Why now? What has changed? With the rise of emerging stock markets, such as Chinese bourses, foreign investors are losing their appetite for Taiwanese shares, which are subject to stringent restrictions.
Strict regulation was a major factor in Taiwan’s removal in June from Morgan Stanley Capital International’s (MSCI) list of national indices for potential upgrade to developed market status, after having been on the list for five years. The reclassification implies more overseas investment flowing into local stock markets. About US$8 trillion is estimated to be benchmarked to the MSCI indices from around the world.
It is time for the local stock market to be globalized and liberalized, or the local bourse will keep losing competitiveness and momentum.
With 80 percent of investment coming from individual investors, China has kept its daily limit at 10 percent, Tseng said. South Korea plans to broaden the trading band to 30 percent next year from its current 15 percent, while no trading limit is imposed in Hong Kong, Singapore and the US, Tseng said.
“Taiwan should be confident in itself, now that individual investors account for 58 percent of overall trading, down from 80 percent before,” Tseng said.
Apart from an improvement in the proportion of stock investors, the FSC’s confidence is also built on some significant relaxations launched last year for investors to hedge against investment risk due to volatility.
Those measures include allowing day trading — buying and selling stocks within the same trading day — of about 200 stocks targeted by major exchange-traded funds. The commission last year also lifted the ban on short-selling listed stocks traded on margin, even when they lose value.
Brokerages and big stock investors embraced Tseng’s new proposal, saying that relaxing the daily trading limit would make the TAIEX more appealing to foreign investors and enable the TAIEX to catch up to its Asian peers in terms of accessibility. As a result, stock turnover would grow, they said.
The effect was already reflected in Monday’s trading, when the TAIEX climbed to 9,322.95, its highest level in more than three months. Turnover spiked to NT$82.76 billion (US$2.61 billion), from the previous trading day’s NT$39.33 billion, on Friday.
It is good to see more deregulation, but it also means greater volatility. Before implementing new trading rules, the regulator needs to be ready with supporting measures to safeguard investors’ interests. Those measures might include a trading suspension mechanism and better information disclosure.
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
Singaporean Prime Minister Lee Hsien Loong’s (李顯龍) decision to step down after 19 years and hand power to his deputy, Lawrence Wong (黃循財), on May 15 was expected — though, perhaps, not so soon. Most political analysts had been eyeing an end-of-year handover, to ensure more time for Wong to study and shadow the role, ahead of general elections that must be called by November next year. Wong — who is currently both deputy prime minister and minister of finance — would need a combination of fresh ideas, wisdom and experience as he writes the nation’s next chapter. The world that
The past few months have seen tremendous strides in India’s journey to develop a vibrant semiconductor and electronics ecosystem. The nation’s established prowess in information technology (IT) has earned it much-needed revenue and prestige across the globe. Now, through the convergence of engineering talent, supportive government policies, an expanding market and technologically adaptive entrepreneurship, India is striving to become part of global electronics and semiconductor supply chains. Indian Prime Minister Narendra Modi’s Vision of “Make in India” and “Design in India” has been the guiding force behind the government’s incentive schemes that span skilling, design, fabrication, assembly, testing and packaging, and
Can US dialogue and cooperation with the communist dictatorship in Beijing help avert a Taiwan Strait crisis? Or is US President Joe Biden playing into Chinese President Xi Jinping’s (習近平) hands? With America preoccupied with the wars in Europe and the Middle East, Biden is seeking better relations with Xi’s regime. The goal is to responsibly manage US-China competition and prevent unintended conflict, thereby hoping to create greater space for the two countries to work together in areas where their interests align. The existing wars have already stretched US military resources thin, and the last thing Biden wants is yet another war.