FSC's three new measures fail to revitalize
The China Post with CNATAIPEI, Taiwan -- Financial Supervisory Commission (FSC)'s three measures to boost trading volume apparently missed target, with turnover falling instead at the end of Wednesday's session.
September 5, 2013, 12:01 am TWN
Shares of domestic securities firms moved higher Wednesday, a day after Taiwan's financial regulator announced three new measures to boost turnover on the country's main stock exchange, dealers said.
The financial sector closed up 0.45 percent on hopes that the government will raise a 15 percent ceiling on a bank's net worth for investment in China.
Among the gaining financial stocks, Mega Financial Holding Co. gained 1.72 percent to close at NT$23.60, while Yuanta Financial Holding Co. added 1.99 percent to end at NT$15.40.
Yuanta Financial, which has large securities business operations, was also boosted by the government's new measures, including a relaxation in rules on day trading aimed at boosting turnover.
“The three new measures announced by the FSC, in particular the relaxation of rules on day trading, are expected to encourage more investors, including speculators, to jump into the action,” KGI Securities analyst Eason Lee said.
The Taiwan Securities Association estimated that once in place, the three proposed measures would lift daily turnover by 10 percent.
“Once turnover expands, the direct beneficiaries will be securities firms. So these stocks attracted buying soon after the local bourse opened today,” Lee said.
In a statement released Tuesday, the FSC said it will allow investors to conduct day trading (buying and selling a stock on the same day) on select large and mid-cap stocks, with the new measure scheduled to take effect on Jan. 6.
At present, day trading is only allowed for margin trading or short selling. In the plan's initial stage, the stocks opened to day trading will be large cap stocks in the FTSE TWSE Taiwan 50 Index and the FTSE TWSE Taiwan Mid-Cap 100 Index, such as Taiwan Semiconductor Manufacturing Co., United Microelectronics Corp., Formosa Plastics Corp., Evergreen Marine Corp., and coffee chain operator Gourmet Master Co.
The FSC will also allow investors to short all stocks for which short selling is allowed, even if a stock's price falls below its closing price from the previous trading session. Only 150 stocks can be traded under those conditions at present. The new short sale provision is scheduled to take effect on Sept. 23.
Finally, the FSC will allow proprietary traders to place buying orders when a stock rises to its daily maximum increase of 7 percent, or place selling orders when a stock plummets by the maximum 7 percent. They are currently not allowed to do so.
The move, which will be implemented temporarily from Sept. 9, 2013 and March 8, 2014, is expected to add upward or downward pressure on the stock when its price is frozen at the daily limit and encourage higher trading volume in subsequent sessions. The new measures will not be without risks, Lee said.
“The relaxation of rules on day trading is likely to increase the chance of defaults by investors. Securities firms need to carefully assess how big of a deposit to require from investors before handling their trades,” the analyst said.