Taiwan activated tighter short-selling controls on Monday after a technology-led rout pushed its benchmark stock index into bear-market territory. The Financial Supervisory Commission reduced the general daily limit for intraday borrowed-stock short-sale orders to 3% of a security's average trading volume over the previous 30 business days, down from 30%. It also raised the minimum margin for short sales of listed and over-the-counter securities to 130% from 90%.

The restrictions are targeted, not a trading ban

The 3% cap does not prohibit investors from selling shares they already own, and it is not a limit on total market selling. It applies to orders using borrowed securities. The commission retained exemptions for specified hedging and liquidity functions, including activity linked to put warrants, exchange-traded notes, structured products, equity derivatives and market making. That distinction matters because the policy is designed to reduce one source of short-term pressure without stopping ordinary transactions or approved risk management.

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The higher margin requirement changes the economics of a short sale by requiring more collateral relative to the position. It does not eliminate losses for either side of a trade, and it does not guarantee fewer price swings. Brokers and securities finance companies remain responsible for applying the revised requirements to eligible accounts and positions.

Taiwan also allowed investors, with approval from a securities finance company or broker, to use a wider range of liquid and objectively valued assets to cover margin shortfalls. The regulator cited foreign securities held through Taiwanese intermediaries as one example. Separately, it encouraged listed companies to consider share repurchases and to communicate operating results and strategy through investor briefings. These are stabilization measures rather than a change to companies' earnings or valuations.

A sharp rebound followed the selloff

Bloomberg reported that the Taiex rose as much as 6.4% in Monday trading, ending a seven-session decline, while Taiwan Semiconductor Manufacturing and MediaTek gained at least 6% at one point. The move followed Friday's close at 39,701.64, down 1,873.08 points, according to Taiwan Stock Exchange data. The exchange's official November table shows the index had fallen in every session from November 2 through November 6.

The government had already authorized the National Financial Stabilization Fund to intervene as needed. Focus Taiwan reported that the NT$500 billion fund's management committee approved its tenth market-stabilization mandate after the Taiex lost 12.19% over the week and finished 20.55% below its October 6 intraday high. Authorization makes intervention available; it does not prove that the full fund, or any specific amount, was deployed in Monday's rebound.

Why the move matters beyond Taiwan

Taiwan's market is heavily exposed to semiconductor and artificial-intelligence supply chains, so rapid changes in local technology shares can affect regional risk sentiment and global chip valuations. The selloff was part of a wider reassessment of AI infrastructure spending and U.S. regulatory risk after the midterm elections. Monday's bounce therefore reflects both domestic policy support and a broader improvement in Asian equity sentiment, not a confirmed end to those concerns.

What remains uncertain

Short-selling limits can reduce the volume of some bearish trades and make borrowed positions more expensive, but they do not remove fundamental risks or prevent further declines. Investors still face uncertainty over global technology demand, interest rates, geopolitical conditions and foreign institutional flows. The next useful evidence will be end-of-day exchange data, disclosure of any actual stabilization-fund purchases and whether trading remains orderly after the initial rebound.

Sources

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