The ratio of average daily turnover of day-trading transactions to overall stock market turnover from Friday last week to Thursday fell to 41.3 percent from 47.5 percent in the preceding five trading sessions, as day traders held back following the launch of a new stock warning system, Taiwan Stock Exchange (TWSE) data showed.
Under the new mechanism, which was launched on Thursday last week, the TWSE announces each trading session the names of stocks whose day-trading turnover should not exceed 60 percent of their turnover for the previous six trading sessions, as a way of informing investors which stocks have become overheated.
Although the TWSE describes the new mechanism as “a neutral tool,” saying it would neither boost nor weaken the stock market, day traders in general regard the announcements as a warning about the stocks, with many turning more conservative about them.
Photo: Chen Jou-chen, Taipei Times
Stocks with volatile share prices over the previous six trading days are treated as “disposition securities,” which traders cannot trade on margin nor day trade for 10 days.
If the disposition securities’ day-trading ratio is also higher than 60 percent, the tougher rules would apply to them for up to 12 days, TWSE rules showed.
On the first day the new mechanism took effect, the TWSE announced the names of 12 stocks with a higher-than-60-percent day-trading ratio.
The ratio of day-trading turnover to overall market turnover that day dropped to 44.5 percent from 47.2 percent a day earlier, TWSE data showed.
The gap of about 3 percentage points equates to about a NT$70 billion (US$2.53 billion) reduction in day-trading transactions, the data showed.
The 12 included shipping stocks such as Yang Ming Marine Transport Corp (陽明海運), Wan Hai Lines Ltd (萬海航運) and Shih Wei Navigation Co (四維航業), whose day-trading ratios were 67 percent, 73 percent and 69 percent respectively for the six days prior to Thursday last week, TWSE data showed.
From Monday to yesterday, the TWSE listed fewer than five stocks whose day-trading ratios surpassed 60 percent, while the day-trading turnover continued to retreat, the data showed.
Day-trading turnover totaled NT$211 billion on Monday, which was the lowest since the warning system was launched and less than half of the NT$445 billion recorded on Aug. 2, when the day-trading ratio was 50 percent, the data showed.
Meanwhile, the ratio generally decreased, sliding from 44.5 percent on Thursday last week to 38.3 percent on Monday, 37.3 percent on Tuesday, 41.7 percent on Wednesday and 44.2 percent on Thursday, the data showed.
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