Tumbling international stock markets have forced the Financial Supervisory Commission (FSC) to ban short-selling of Taiwanese shares at less than the previous day’s closing prices to stabilize the local market.
The new measure, announced yesterday and to take effect today, will ban investors from short-selling borrowed stocks and Taiwan depositary receipts for less than their closing prices in the previous session, the commission said in a statement.
The move came as the benchmark TAIEX fell below the 10-year moving average of 7,800 points on Friday — dropping 3.02 percent to 7,786.92 — in response to volatility in regional equity markets.
Elsewhere in Asia, Shanghai shares closed down 4.27 percent on Friday at 3,507.74 points, ending their worst week since 2011, and Hong Kong fell 1.53 percent to 22,409.62 points on Friday — its lowest point since May last year. Tokyo shares fell 2.98 percent to a more than three-month low, Seoul fell 2.01 percent and Sydney dropped another 1.4 percent.
On Wall Street on Friday, the Dow Jones Industrial Average lost 530.94 points, or 3.1 percent, to close at 16,459.75 points, the S&P 500 dropped 3.2 percent and the NASDAQ Composite fell 3.5 percent.
Despite the commission on Thursday announcing a series of stimulus initiatives aimed at freeing capital and improving utilization in a bid to boost the local stock market’s turnover, selling continued to increase on Friday, FSC Chairman William Tseng (曾銘宗) said by telephone yesterday.
“Due to the Dow Jones Industrial Average’s 530-point plunge, we think it is necessary to implement the new measure to prevent further short-selling,” Tseng said.
In addition, Tseng said the commission discovered some unusual transactions conducted by a foreign non-financial company via three to five local brokerages.
The foreign company is allegedly targeting a few Taiwanese small and medium-sized enterprises and selling their stocks via the local brokerages, Tseng said.
The Securities and Futures Bureau is to request those local brokerages to address the issue today, he said.
“We will determine if the foreign company and the local brokerages have violated Article 155 of the Securities and Exchange Act (證券交易法) in an effort to deflate trading prices for their own benefit,” Tseng said.
If the foreign firm is found to have broken the law, the commission will transfer the case to prosecutors for further investigation, he added.
As part of efforts to stimulate stock market turnover, Tseng said the commission also requested the Taiwan Stock Exchange and the Taipei Exchange to arrange earnings conferences by listed companies whose stocks might have been oversold.
“The conferences will help investors understand more about the earnings potential of those companies, which will lead to them purchasing shares, boosting stock market turnover,” he said.
The commission said in the statement that it also encouraged the banking sector to buy back its own shares and purchase blue-chip stocks on the open market to help improve market sentiment.
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