Taiwan’s Financial Supervisory Commission (FSC) has announced it will lift short-selling restrictions on local shares starting Monday (May 27, 2025), citing stabilized market conditions and improved investor confidence. This decision marks the end of a nearly seven-week emergency policy triggered by an unprecedented market plunge following former U.S. President Donald Trump’s renewed tariff threats on Chinese goods in April.
The rollback of these controls reflects Taiwan’s cautious optimism about ongoing market resilience, while also suggesting that authorities are considering long-term changes to trading rules to ensure future financial system flexibility.
🔍 Background: Why Short Selling Was Curbed in April
On April 7, 2025, Taiwan’s main stock index, the Taiex, suffered a historic single-day drop of 9.75%, wiping out over NT$5 trillion in market value. This was directly triggered by Trump’s dramatic announcement of 60% tariffs on all Chinese imports if elected—a move that spooked Asian markets and raised concerns about global supply chain disruptions.
Taiwan, home to tech giants like TSMC, was especially vulnerable. In response, the FSC intervened swiftly, implementing temporary short-selling curbs that included:
- Reducing the daily short-selling volume cap to 3% of the stock’s average trading volume.
- Raising the minimum margin requirement to 130% from the usual 90%.
- Extending oversight on leveraged and margin trading across all brokerages.
These emergency measures aimed to prevent speculative downward pressure and restore market order amid heightened global uncertainty.
✅ What’s Changing on Monday, May 27
With the Taiex having fully rebounded and investor panic subsiding, the FSC is rolling back the controls:
- The intraday short-sell volume limit will revert from 3% back to 30% of the average daily volume.
- The minimum short-selling margin ratio will return to 90%.
- Brokerage surveillance will be eased, restoring normal pre-April trading conditions.
- Relaxed rules on collateral for margin deficits, introduced temporarily, will remain in place for now—and may even be made permanent.
The FSC said it will continue evaluating the long-term usefulness of flexible margin coverage rules to better support retail investors and broker liquidity.
💡 Analysis: Why This Matters for Taiwan’s Market
1. Investor Confidence Is Back
The Taiex’s strong recovery—from an April 9 low of 17,391.76 to 21,652.24 as of May 24—suggests that investor panic was temporary, and Taiwan’s underlying economic fundamentals remain solid.
2. Global Market Shock Resilience
This episode tested Taiwan’s capacity to manage external macroeconomic shocks, especially those originating from geopolitical tensions like U.S.–China trade disputes. Authorities acted swiftly, and the market rebounded sharply, showing institutional resilience.
3. Toward Flexible Regulation
The FSC’s openness to making relaxed collateral rules permanent hints at a broader regulatory modernization effort. As Taiwan seeks to compete with global financial hubs, these reforms may make it more attractive to institutional and retail investors.
🏦 Role of the NT$500 Billion National Stabilization Fund
Though not deployed directly during the April crash, Taiwan’s National Stabilization Fund remained on standby. The fund, with a war chest of over NT$500 billion (US$15.5 billion), was approved by Premier Cho Jung-tai earlier this year to serve as a backstop for systemic shocks, especially in the wake of U.S. trade uncertainty.
Its continued presence plays a psychological role—assuring markets that the government has the means to step in during crisis scenarios. FSC officials confirmed that the fund will remain active as a market buffer, though its use will be conservative and guided by long-term economic outlooks.
🧭 What to Watch Next
- U.S. Presidential Election Outcome (Nov 2025): If Trump wins, tariff policies could trigger another wave of market volatility.
- FSC’s Permanent Rule Changes: Taiwan may soon revise its Securities and Exchange Act or adopt international best practices for short-selling oversight.
- Tech Sector Exposure: With Taiwan’s economy deeply reliant on semiconductors and electronics, any disruptions to U.S.–China trade will continue to ripple across Taiwan’s stock exchange.
📌 Conclusion
The FSC’s decision to lift short-selling curbs marks a return to market normalcy and a vote of confidence in Taiwan’s economic fundamentals. While April’s tariff-triggered crash shook investor sentiment, the strong rebound and government response underscore Taiwan’s market maturity.
More importantly, this episode may become a catalyst for permanent regulatory reform, positioning Taiwan as a more agile and investor-friendly market in the face of ongoing geopolitical uncertainties. As the global spotlight remains on Asia, Taiwan appears to be reinforcing its financial defense systems, without compromising on the transparency and flexibility that modern markets demand.
❓ FAQs
Why were short-selling restrictions imposed in April 2025?
The FSC implemented restrictions after the Taiex dropped nearly 10% in one day due to market panic over U.S. tariff threats.
What is changing on May 27?
The FSC is restoring normal short-selling volume limits (30%) and reducing the short-selling margin requirement back to 90%.
Will these restrictions return if the market crashes again?
Yes, the FSC retains the right to reintroduce controls if systemic risks re-emerge.
What is the role of the National Stabilization Fund?
It’s a government fund used to support the market in times of financial crisis or extreme volatility.
Is Taiwan considering more permanent financial reforms?
Yes, particularly regarding flexible margin rules and broader trading oversight, to modernize and protect its financial markets.
