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Stock market turnover ratio forecast to improve next year: finance minister

TAIPEI, Taiwan -- The turnover ratio of the local market is expected to improve next year, as investors will be allowed to conduct day trading in a wider range of stocks from January, a finance official said Wednesday.

Speaking during a session of the finance sub-committee of the Legislative Yuan, Finance Minister Chang Sheng-ford said the relaxed measures for day trading (buying and selling a stock on the same day) is expected to boost buying interest in the local market, so that the turnover ratio is likely to grow accordingly from January.

But Chang emphasized that the buying interest will only improve gradually.

According to Chang, the turnover ratio, which is a ratio of total trading volume to market capitalization, is expected to stand at only 83 percent in 2013. The figure is even lower than the ratio of almost 85 percent recorded in 2012, according to government statistics.

In September, the Financial Supervisory Commission (FSC), the top financial regulator in Taiwan, announced that investors will be allowed to conduct select large- and mid-cap stocks, with the new measures scheduled to take effect Jan. 6.

Currently, 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.

The 150 stocks eligible in the new day trading rule include Taiwan Semiconductor Manufacturing Co. (台積電), United Microelectronics Corp. (聯電), Formosa Plastics Corp. (台塑), Evergreen Marine Corp. (長榮集團) and coffee chain operator Gourmet Master Co. (85度C).

The new day trading measures are part of the FSC's efforts to push up daily turnover in the local market.

In addition to the relaxed day trading rules, Chang said the world economy is on the way to improvement, which is positive for the global equity markets, including Taipei's.

Chang said that if the U.S. Federal Reserve announces a scaling back of its monthly US$85 billion bond-buying program soon, the move could further reinforce the public's belief that the economic fundamentals of the U.S., the largest economy in the world, have become healthier after the large fund injections.

Among the brokerages that are upbeat about the local market, Prudential Financial Securities Investment Trust expects the weighted index on the Taiwan Stock Exchange to challenge 9,200 points in 2014 on the back of the improved economy.

Prudential said the Taiwan stock market is expected to continue to benefit from ample liquidity next year.

The weighted index closed down 0.04 percent at 8,349.04 points Wednesday.

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