TAIPEI: The Financial Supervisory Commission (FSC) yesterday urged investors to stay calm in light of a precipitous tumble in the local bourse due to Brexit-induced market anxieties after the closing bell.
The TAIEX fell 2.3 percent to close at 8,476.99 points, after foreign institutional investors sold a net NT$13.04 billion (US$401 million) worth of shares on the local bourse yesterday. The massive foreign institutional selling in Taiwanese shares also drove the New Taiwan dollar to close NT$0.312 lower at NT$32.502, a three-week low.
“The TAIEX’s retreat is in line with expectations and comparable with neighboring markets,” FSC vice chairman Kuei Hsien-nung told a news conference, adding that markets had fallen as much as 7 percent in Japan, 3 percent in South Korea and 4 percent in Hong Kong.
He said that despite gloomy sentiment, the local bourse had recovered from its intraday low of 8,374.26 points.
As trading turnover nearly doubled to NT$121.65 billion from the NT$60.89 billion in the previous session, Kuei said it suggests that there are plenty of investors ready to pick up stocks at bargain prices.
“We do not see a need for drastic measures, but governing bodies stand ready to implement contingency plans at an appropriate time,” Kuei said.
Regulators have a playbook of measures against extreme financial events caused by external developments such as Brexit, and cross-departmental efforts have begun prior to the presidential handover last month, he said.
These measures include limits on trading mechanisms that have been activated in the past, such as more stringent caps on margin trading and short selling, he said without elaborating further.
“The 10 percent daily limit also serves as a built-in circuit breaker to guard against anomalous market events,” Kuei said.
The domestic financial sector’s exposure to the UK was tallied at a manageable NT$1.1 trillion as of the end of April, of which NT$784.33 billion are from life insurers, while companies have built up provisions of NT$54.9 billion against foreign exchange-related risks, the commission said.
The most significant risk is on pound-denominated assets, but the category only represents 1.1 percent of life insurers’ overall exposure to England, Insurance Bureau deputy director-general Shih Chiung-hwa said.
Meanwhile, the National Financial Stabilization Fund is to begin assessing whether its intervention is warranted on Monday, said Deputy Minister of Finance Su Jain-rong , who doubles as executive secretary of a committee governing state funds.
The government’s war chest against irregular market upheavals remains plentiful, Su said.
