The Financial Supervisory Commission (FSC) yesterday announced a short-selling ban on the Taiwan Stock Exchange and the Taipei Exchange (TPEX), starting today, as it attempts to curb speculative trading amid “irrational declines on the stock market.”
Unlike previous bans imposed in 1998, 2008 and 2015, which applied to all stocks, this ban applies only to stocks that showed a decline of 3.5 percent or more a day earlier, Securities and Futures Bureau Deputy Director Sam Chang (張振山) told a news conference in New Taipei City.
The TAIEX fell 5.83 percent and the TPEX dropped 7.53 percent yesterday, and 1,233 stocks on the two boards reported declines of more than 3.5 percent, the commission’s data showed.
Photo: CNA
Tech heavyweights Taiwan Semiconductor Manufacturing Co (台積電) and Largan Precision Co (大立光) fell 3.69 percent and 9.72 percent respectively.
Short selling is when investors borrow securities, typically from brokerages, and then sell them, expecting the price will fall, to make a profit by buying them back later for less money.
“A short-selling ban can prevent speculators from betting against financial stocks, but it may also create more fear among ordinary investors. It is difficult to foresee if the measures would help,” an analyst told the Taipei Times by telephone on the condition of anonymity.
Short selling for the 1,233 stocks would be banned today, Chang said, adding that the number of stocks subject to the new measure would vary daily.
The ban would persist for stocks that continue to fall by 3.5 percent or more, he added.
“We want to curb volatility in the local markets amid a sell-off prompted by the fear of COVID-19, allowing respite for battered equities,” Chang said. “The local market appeared irrational, but not that crazy as it was in the [2008] financial crisis.”
Given that turnover on the main board stood at NT$269.74 billion yesterday, higher than the daily average of NT$146 billion last month, it indicated that many investors still had confidence in the local market, he said.
“Average daily turnover was less than NT$50 billion during the worst period in 2008. So the situation is much better now,” Chang said.
The FSC did not say how long the short-selling ban would last, saying that it would review the ban based on the COVID-19 pandemic situation.
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