Average daily turnover on the local stock market could fall 40 percent to below NT$300 billion (US$10.8 billion) next year as the US looks set to reverse its monetary policy, the Financial Supervisory Commission (FSC) told a meeting of the legislature’s Finance Committee yesterday.
The commission said that turnover could slip to NT$287 billion next year from an estimated average of NT$478.2 billion this year.
The commission provided the figure as a reference for lawmakers when they review proposed amendments to the Securities Transaction Tax Act (證券交易稅條例), which aims to extend the tax cut on day trading until the end of 2024.
“Projecting the local stock market turnover is difficult, as it can be affected by many factors, such as local and foreign policies, foreign fund movements and the macroeconomic environment,” Securities and Futures Bureau Chief Secretary Kao Ching-ping (高晶萍) told the Taipei Times by telephone.
“So, we tried to focus on a bigger factor, the US’ monetary policy, and analyzed its effect on Taiwan’s market,” Kao said.
The average market daily turnover was NT$155.6 billion in 2019 and grew about 60 percent to NT$252.4 billion last year, when the US loosened its monetary policy, Kao said.
As the US Federal Reserve is expected to unwind its easy monetary policy by the end of this year or early next year by tapering its asset purchases or even raising borrowing rates, the commission forecast that stock market turnover would shrink 40 percent next year from this year, she said.
“However, it is a rough assumption, as there were also other factors responsible for the advance in the turnover from 2019 to last year. Turnover next year would not plunge by 40 percent unless an extreme scenario materializes — for example, the US Fed ending its asset purchase quickly and immediately,” Kao said.
Asked whether he agreed with the projected fall in turnover, FSC Chairman Thomas Huang (黃天牧) said it was just a prediction and that, aside from the US’ monetary policy, many other factors could affect turnover, such as inflation and the COVID-19 situation.
If the US ends quantitative easing, it would definitely affect global fund movements, including foreign funds in Taiwan’s stock market, but local corporate earnings would be the key factor that decides turnover, he told lawmakers.
He added that local stocks’ fundamentals are expected to remain solid next year.
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