Fi­nan­cial stocks up on FSC’s new rules re­mov­ing credit trad­ing cap

The China Post - - TAIWAN BUSINESS -

The fi­nan­cial sec­tor moved higher Fri­day morn­ing af­ter the Fi­nan­cial Su­per­vi­sory Com­mis­sion (FSC, ) de­cided to re­move the ceil­ing on the value of credit trad­ing — mar­gin trad­ing and se­cu­ri­ties bor­row­ing — as part of its ef­forts to boost ac­tiv­ity in the lo­cal eq­uity mar­ket, deal­ers said.

While the bell­wether elec­tron­ics sec­tor fell into con­sol­i­da­tion mode, buy­ing ro­tated to the fi­nan­cial sec­tor in the wake of the new trad­ing rules, lend­ing some sup­port to the broader mar­ket, they said.

As of 11:11 a.m., the fi­nan­cial sec­tor had climbed 0.71 per­cent to 1,199.00 points, while the elec­tron­ics sub-in­dex had risen 0.15 per­cent to 363.47 points. The weighted in­dex on the Tai­wan Stock Ex­change was up 0.04 per­cent at 9,306.02 points.

“The move to re­move the re­stric­tions on credit trad­ing prompted in­vestors to shift their at­ten­tion to the fi­nan­cial sec­tor on hopes that a boom in the lo­cal bourse would strengthen the prof­itabil­ity of se­cu­ri­ties com­pa­nies,” Hua Nan Se­cu­ri­ties an­a­lyst Henry Miao said.

“The eas­ing of trad­ing rules on the lo­cal bourse is ex­pected to give in­vestors more flex­i­bil­ity and greater con­ve­nience,” Miao said.

Re­move Ceil­ing for Credit

Trad­ing Value

The FSC, the top fi­nan­cial reg­u­la­tor in Tai­wan, an­nounced Thurs­day the re­moval of the ceil­ing for credit trad­ing value, start­ing June 29. Tai­wan im­posed the cap on the value of credit trad­ing in 1980, stip­u­lat­ing NT$80 mil­lion for mar­gin trad­ing and NT$60 mil­lion for se­cu­ri­ties bor­row­ing by re­tail or in­sti­tu­tional in­vestors. For credit trad­ing in small or mid-cap stocks, the ceil­ing was set at NT$40 mil­lion, while for se­cu­ri­ties bor­row­ing it was NT$30 mil­lion.

While mar­ket ac­tiv­ity may ex­pand with the re­moval of the re­stric­tions, the FSC said, se­cu­ri­ties com­pa­nies would have to tighten risk con­trol to avoid losses by closely mon­i­tor­ing their clients’ credit records and col­lat­eral.

The bal­ance of mar­gin trad­ing was NT$190.5 bil­lion as of June 10, while the bal­ance of se­cu­ri­ties bor­row­ing was 395 mil­lion shares,

ac­cord­ing to the FSC.

Lib­er­a­tion of the Eq­uity Mar­ket

It said the in­tro­duc­tion of the new credit trad­ing rules fol­lowed the re­cent lib­er­a­tion of the eq­uity mar­ket in a bid to stim­u­late trad­ing in­ter­est and even­tu­ally boost the daily turnover on the lo­cal mar­ket.

The FSC ear­lier this month in­creased the lim­its for daily fluc­tu­a­tions of stock prices on the lo­cal main board and over-the-counter mar­ket, from 7 per­cent to 10 per­cent.

It also in­creased the amount of eq­uity re­quired for in­vestors to main­tain their mar­gin trad­ing ac­counts — known as the col­lat­eral main­te­nance ra­tio — from 120 per­cent to 130 per­cent of the amount bor­rowed on mar­gin.

“Although the fi­nan­cial sec­tor re­bounded Fri­day from a fall in the pre­vi­ous ses­sion ear­lier, the broader mar­ket con­tin­ued to move in a nar­row range af­ter the volatil­ity in re­cent ses­sions,” Miao said.

He said the in­dex was likely to con­tinue to trade in a range of 9,250 to 9,350 points for the rest of the day.

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