Taiwan’s Financial Supervisory Commission implements a five-day restriction on short-selling triggered by new U.S. tariffs on Chinese goods, aimed at stabilizing market sentiment and preventing further volatility.
Taiwan’s Financial Supervisory Commission (FSC) revealed its decision to impose a non-permanent curb on the short selling of shares in the market on Sunday, as a response to U.S. President Donald Trump’s new import tariffs on Chinese goods. In an attempt to deal with the resulting potential market volatility, the financial regulator mentioned in a statement that it will temporarily ban short-selling at prices lower than the previous day’s close for five consecutive trading days, starting Monday and lasting until Friday. The number of shares to be sold short would be reduced with an increase in the minimum short-selling margin ratio from 90% to 130% during the period. The measure applies to stocks listed on both the Taiwan Stock Exchange and the over-the-counter (OTC) market.
The commission said that the tariffs were “bound to create a number of major uncertainties for the stability of Taiwan’s capital market”, while also adding that it would continue to respond to changes in the international financial market promptly without any further elaboration.
As per the latest plans announced by Trump last Wednesday, Taiwan, a leading global semiconductor supplier with a significant trade surplus with the U.S., now faces a 32% tariff.
While Taiwan’s stock market was closed for the past 2 trading days due to holidays, global indexes have plunged in response to the tariff announcements, with the S&P 500 losing $5 trillion within Thursday and Friday.
Impact on Taiwan-Dollar Exchange Rate
Anonymous sources well-versed with the situation have mentioned the confidence of Taiwan’s central bank in minimizing the volatility of the Taiwan-Dollar exchange rate when the market opens on Monday.
While traders are of the view that the Taiwan dollar is likely to face considerable depreciation pressure against the U.S. dollar on Monday, foreseeing an outflow of foreign capital, the source conveys that Taiwan has enough forex reserves in its pocket for potential damage control.
The Taiwan dollar has weakened by approximately 0.9% against the U.S. dollar this year, while the country’s benchmark equity index has declined by 7.5% since January.
The short-selling ban follows a similar move by Taiwan’s regulators in 2022, implemented during a period of global market turbulence. Authorities believe such interventions are crucial in managing speculative activity and ensuring orderly market functioning.
