Gov’t tight­ens stock short-selling rules

Rules will pro­hibit short selling be­low prices from pre­vi­ous day

The China Post - - FRONT PAGE - BY JOHN LIU

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.

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