The nation's financial regulator plans to phase out a rule that prevents locally traded stocks from rising or falling by more than 7 percent per day and says the move will come no later than September.
"The 7 percent daily limit is too small and will gradually be expanded to an eventual 15 percent should the local stock market be upgraded to a developed market," Financial Supervisory Commission (FSC) Vice Chairman Lu Daung-yen (
Pending market responses, moderate steps will be taken to ensure the local capital market's stability, Lu said.
He added that a trial run to temporarily suspend the limit for newly listed companies during the first five trading days after March 1 will act as a precursor for the commission to decide whether to lift the limit in increments.
"We may move from 7 percent to 10 percent or 12 percent first before reaching the goal of 15 percent," he said.
Lu said a gradual move to enlarge the trading limit would be prudent given that Taiwan is excluded from international economic organizations such as the World Bank so any financial fallout here has to be dealt with by the nation itself.
The new measure is expected to take effect "in the third quarter," Lu said, confirming remarks made by FSC Chairman Kong Jaw-sheng (
In an interview with a Chinese-language business daily, Kong said "the daily limit is likely to be lifted as early as in the second or the third quarter."
On Dec. 31, Kong had said that "the 7 percent daily limit has to go eventually" although he did not give an exact timetable.
Lu said the commission had told the Taiwan Stock Exchange Corp and the Securities and Futures Institute to prepare for a possible change in trading practices in the near future. He said the exchange requires three months to adjust its automatic trading system while it will take time for the securities institute to educate investors about the potential trading risk under the new 15 percent limit scheme.
The 7 percent daily limit has been criticized for possibly distorting market forces and preventing maturation of the stock market.
According to a Bloomberg report, Kong vowed to develop the exchange into a global market while doubling the nation's annual fund-raising by foreign firms to NT$35 billion (US$1.1 billion) in 2008 from NT$17.5 billion at the end of 2003.