Foreign capital inflow hits US$201.62 bil. record high
Net foreign capital inflow amounted to a record high US$201.62 billion as of April 27, said Financial Supervisory Commission (FSC) Chairman Tseng Ming-chung ( ) yesterday.
Tseng made the remark as he attended the 2015 Golden Service Awards ceremony held by CommonWealth Magazine ( ).
Pressed by the media on the sidelines of the event, Tseng commented on the recently launched “ascension plan” ( ), a package of measures aimed at boosting the stock market.
Among them is relaxing the daily stock fluctuation limit from the current 7 percent to 10 percent, which is set to kick off in June.
Another rule will also be implemented in May as a prelude to June’s mandate. The maintenance margin requirement, which is the minimum amount to be collateralized in order to keep an open position, will be raised from 120 percent to 130 percent.
Since the average maintenance margin on the market is pegged at 160 percent, only a low proportion of investors will need to increase their margin, Tseng noted.
Ascension Plan is for
The ascension plan is a “neutral” measure that will enable quicker reflection of information and fundamentals, and therefore lead to higher liquidity, Tseng said.
The new system will better align with the global market, make transactions more efficient and consequently attract more investment activities, Tseng added.
Nevertheless, the new measures are not expected to wield immediate impact on trade turnover, since they are set up for mid- and long-term improvements, Tseng said.
“When weighing taxation and trading mechanisms, we take two aspects into consideration. The first is foreign and domestic investors; the second is short- and long-term impact. Taking them into account will create a greater development room for the capital market.”
For instance, lowering securities and futures transactions taxes may not lift the local stock market immediately. The futures transactions tax is not levied overseas, and with its broad implications it deserves further study, Tseng added.
Institutional Investors’ Confidence in the Market
Taiwan Stock Exchange President Michael Lin ( ) expressed earlier that changing the cap limit on daily stock fluctuation will increase trading over time once investors get used to the new system.
The three largest institutional investors in Taiwan — foreign investment institutions, investment trusts and dealers — placed more purchase than sell orders again yesterday, by NT$ 5.9 billion.
Foreign investors have shown stronger faith in Taiwan’s stock market, which recently hit the 10,000-point mark for the first time in 15 years.
Foreign investors in general are upbeat about the local stock market’s prospects, citing an abundance of money flowing around, higher corporate profitability, among other factors.