The Financial Supervisory Commission (FSC) yesterday said it would soon allow foreign institutional investors to use local equities as collateral for their overseas investments.
The change would apply only to foreign securities companies or banks designated as foreign institutional investors, Securities and Futures Bureau Chief Secretary Julian Hwang (黃厚銘) told an online news conference.
The Taiwan Stock Exchange (TWSE) and Taiwan Depository and Clearing Corp (台灣集中保管結算所) have yet to finalize details, such as how much money investors can borrow by using local shares as collateral, he said.
Photo: CNA
The deregulation would take effect by the end of this year, he added.
The measure marks the commission’s latest effort to stabilize local equities by giving foreign institutional investors an additional incentive not to dump local shares.
As of Friday, foreign investors had sold NT$1.197 trillion (US$38.3 billion) of shares since the beginning of this year, a record high, following the US Federal Reserve’s aggressive interest rate hikes, TWSE data showed on Monday.
Foreign institutional investors currently hold NT$19.59 trillion of shares, accounting for about 39 percent of total market capitalization, the commission said.
“Foreign institutional investors have proposed such a deregulation in the American Chamber of Commerce in Taiwan’s 2022 Taiwan White Paper,” Hwang said.
“After discussing it with the central bank, we decided that such a deregulation is viable and would have a positive effect on local stock markets,” Hwang said.
Hwang said some foreign investors have sold shares due to pessimism over local stocks, as well as a need to fund overseas investments.
“Allowing them to use local shares as collateral would help curb sales of their local holdings,” he said.
Separately, the commission said local banks have agreed not to provide revolving loans or cash-back rewards to clients who have used their credit cards on overseas investment platforms, such as eToro, starting from February next year.
Consumers can still invest on such platforms using their credit cards, but they must pay the amount in full in the following billing period and would not earn any rewards, it said.
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