Taiwanese shares rallied after authorities unveiled measures to restore investor confidence following the longest selling streak since 2022 amid a global AI stock rout.
The island’s benchmark Taiex Index rose 4.9% on Monday, the most since July 31 and ending a seven-session decline that pushed the technology-heavy market into bear territory. Taiwan Semiconductor Manufacturing Co. and MediaTek Inc. led the gains, rising at least 4% each.
The rebound came after Taiwan’s market regulator and finance ministry both pledged to take steps to calm investor nerves, including imposing curbs on short selling from Monday, and readiness to deploy the NT$500 billion ($15.2 billion) stock stabilisation fund. Also lifting investor mood was wider strength in Asian equities on Monday, despite concerns over an investigation into Nvidia Corp.’s chief executive officer Jensen Huang.
The market’s strong open clearly suggests the stabilisation measures “are overpowering any impact from the Jensen Huang development that many investors may see as a sideshow on the semiconductor sector’s long-term trajectory,” said Homin Lee, senior macro strategist at Lombard Odier in Singapore.
The Financial Supervisory Commission said after Friday’s market close that it will cap the volume of intraday short-sale orders for borrowed securities at 3% of a stock’s average daily trading volume over the preceding 30 days. That’s reduced from 30% previously. The financial regulator will also raise the minimum margin requirement for short-selling activities to 130% from 90%.
“While the National Stabilisation Fund announcement provides a sentiment boost to the stock market, the actual deployed capital could be limited,” according to a Goldman Sachs Group Inc. sales and trading desk note to institutional clients.
“Only NT$0.76 billion~122.7 billion were actually deployed in the past 9 instances versus the National Stabilisation Fund’s NT$500 billion usable capital. That being said, from previous experience, NSF tends to buy large-cap tech or financials with heavy index weighting,” the note added.
The fund’s previous nine episodes of intervention, including those during the dot-com bubble, the global financial crisis and the Covid 19 pandemic, prompted the market to rally 6% on average in the following week and 22% over one year, according to Goldman Sachs. However, six out of the nine times experienced additional 5% to 28% drawdowns within six months after the fund’s activation.
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