Taiwan's top financial regulator said on Sunday it will impose temporary curbs on short-selling of shares to help deal with potential market turmoil from U.S. President Donald Trump's new import tariffs, and will take other steps as needed.
Taiwan's Financial Supervisory Commission said in a statement it would limit the number of shares that can be sold short and raise the minimum short-selling margin ratio to 130% from 90%, starting from Monday and lasting until Friday.
Short sellers borrow shares they expect to fall, aiming to repay the loan for less later to pocket the difference.
Taiwan's stock market (.TWII) was closed last Thursday and Friday for a holiday and reopens on Monday, meaning investors have yet to have a chance to respond to the tariffs. Global stock markets have plunged since they were unveiled, with the S&P 500 losing $5 trillion in two days.
The commission said that the tariffs were "bound to create a number of major uncertainties for the stability of Taiwan's capital market".
It will continue to monitor the international financial developments and the domestic capital market, and adjust the measures "in a timely manner", it added, without elaborating.
"The new regulations have been introduced to make it clear that speculative short selling is not welcome," Kao Ching-ping, deputy head of the commission's Securities and Futures Bureau told Reuters.
Taiwan, the world's biggest manufacturer of advanced semiconductors that runs a large trade surplus with the United States, is subject to a 32% tariff under the plans announced by Trump on Wednesday.
The Taiwan dollar is likely to face considerable pressure against the U.S. dollar on Monday, traders said, given expected heavy falls in the domestic stock market and an outflow of foreign capital.
But a source familiar with the situation told Reuters that Taiwan has abundant foreign currency reserves to help the central bank cushion the impact on the Taiwan dollar when the market re-opens.
"The central bank is confident that it has the ability to maintain the stability of the exchange rate," the source said, speaking on condition of anonymity.
The Taiwan dollar has depreciated around 0.9% against the greenback so far this year, while the benchmark stock index is down 7.5% since the start of the year.
