Gov’t tightens stock short-selling rules
Rules will prohibit short selling below prices from previous day
In an attempt to stabilize Taiwan’s equity market, the Financial Supervisory Commission (FSC,
) announced that starting today, short selling of stocks below the closing prices of the previous business day will not be permitted.
Investors will not be allowed to short sell borrowed stocks and Taiwan Depositary Receipts below the closing prices of the previous session, the FSC said.
As stock markets tumbled last Friday around the world, the challenge for Taiwan stocks this week, amid a gloomy outlook, will be whether they can uphold the 10-year moving average benchmark, according to securities analysts.
Taiwan stocks plunged 242.89 points to close at 7,786.92 last Friday. In all, the market went down more than 500 points over the past week, falling below the decade moving average of 7,795 points.
Dow Jones also dived 530.94 points, or 3.12 percent, to end at 16,459.75. Driven largely by concerns over mainland China’s economic slowdown, it was the largest single-day drop in nearly four years for the U.S. market. Share prices also suffered great losses across European markets on Friday.
According to foreign institutional investors, Taiwan’s stock market has reached near the bot- tom and is likely to rebound.
Asia-based overseas investors believe the market will gain momentum as the iPhone 6S hits the market later this year. Europebased investors maintain that Taiwan stocks are priced relatively low given their current price to earning ratios.
The Fed’s Rate Hike
Plays a Role
Domestic analysts in general hold a “cautiously optimistic” view toward stock performance. Yuanta Futures ( ) analyst Zheng Zhong-jyun ( ) predicts the index will fluctuate around the 10-day moving average before finally stabilizes.
Given the U.S. Fed’s possible rate increase, the world market is unlikely to experience a major financial crisis, Zheng said.
Zhao Xian-cheng ( ), a fund manager at JihSun Securities ( ) regards the decade moving average as a “confidence indicator,” and said incentives that “bar money from leaving” should sustain the market.
There are almost no more issues that can stir market panic, Zhao said, adding that further market slips would indicate a good position to buy. The Fed’s deci-
it sion on increasing rates or not in September will play a critical role in the world’s money flow, Zhao added.
A Volatile Market This Week
Beven Yeh ( ), manager of the Prudential Financial High Growth Fund, forecast a volatile market in the coming week, with a short-term turnover of less than NT$10 billion.
The stock market lost some backing as New Taiwan dollars flew out of the country on the back of the mainland Chinese yuan’s devaluation, which has driven other countries in Asia to depreci- ate local currencies, Yeh said.
The devaluation may be a boost for domestic exporters that use the greenback, however, and rake in more revenues in the third quarter, according to Yeh.
Taiwan stocks fell below the 10-year moving average threshold during the 2008 financial crisis. The stock index managed to climb above the threshold only more than six months later.
The index also slumped down the decade average in 2011, when tension rose across the North and South Korea border following the death of the former’s leader Kim Jong Il.