Taiwan Imposes Short-Selling Curbs

Taiwan Imposes Short-Selling Curbs to Cope with US Tariff Uncertainty

Taiwan’s top financial regulator, the Financial Supervisory Commission, announced on Sunday, April 6, that it will impose temporary curbs on short-selling of shares to deal with potential market turmoil caused by US President Donald Trump’s new import tariffs. The commission stated that it will limit the number of shares that can be sold short and raise the minimum short-selling margin ratio to 130% from 90% starting from Monday and lasting until Friday.

Temporary Measures to Mitigate Market Turmoil

The commission’s decision aims to mitigate the impact of the tariffs on Taiwan’s capital market. The tariffs announced by Trump are "bound to create a number of major uncertainties for the stability of Taiwan’s capital market," according to the commission. The measures are designed to prevent excessive market volatility and ensure market stability.

Impact on Taiwan’s Stock Market

Taiwan’s stock market was closed on Thursday and Friday for a holiday, reopening on Monday. Investors have yet to react to the tariffs, which have already caused a global stock market plunge, with the S&P 500 losing $5 trillion in two days. The commission will continue to monitor the international financial situation and adjust measures as necessary.

Central Bank’s Confidence in Maintaining Exchange Rate Stability

Separately, a source familiar with the situation informed Reuters that Taiwan’s central bank is confident it can maintain the stability of the Taiwan dollar’s exchange rate when the market reopens. The Taiwan dollar is expected to face significant depreciation pressure against the US dollar on Monday due to a potential outflow of foreign capital and a decline in Taiwan stocks.

Key Points:

• The Financial Supervisory Commission will impose temporary curbs on short-selling of shares to deal with potential market turmoil caused by US tariffs.
• The commission will limit the number of shares that can be sold short and raise the minimum short-selling margin ratio to 130% from 90%.
• The measures are designed to prevent excessive market volatility and ensure market stability.
• Taiwan’s central bank is confident it can maintain the stability of the Taiwan dollar’s exchange rate.
• The Taiwan dollar is expected to face significant depreciation pressure against the US dollar on Monday.

Conclusion

The Taiwanese authorities are taking proactive steps to mitigate the impact of the US tariffs on the local market. The temporary curbs on short-selling and the central bank’s confidence in maintaining the exchange rate stability aim to ensure market stability and prevent excessive volatility.

FAQs

Q: What are the temporary measures imposed by the Financial Supervisory Commission?

A: The commission will limit the number of shares that can be sold short and raise the minimum short-selling margin ratio to 130% from 90%.

Q: Why are the measures necessary?

A: The measures are designed to prevent excessive market volatility and ensure market stability, as the US tariffs are "bound to create a number of major uncertainties for the stability of Taiwan’s capital market."

Q: How confident is the central bank in maintaining exchange rate stability?

A: The central bank is confident it can maintain the stability of the Taiwan dollar’s exchange rate, with abundant foreign exchange reserves to cushion the impact on the Taiwan dollar.

Q: What is the current state of the Taiwan dollar against the US dollar?

A: The Taiwan dollar has depreciated around 0.9% against the greenback so far this year, while the benchmark stock index is down 7.5% since the start of the year.