Taiwan Regulator Sees No Need for Short-Selling Restrictions Amid Market Volatility

Highlights

Taiwan’s Financial Supervisory Commission Chairman Peng Jin-long (彭金隆) told lawmakers that recent stock-market volatility does not currently warrant government intervention. He said market participants should be allowed to trade on available information unless trading becomes irrational or the market fails to function properly. The retreat from the market high has reached 17%, prompting questions about whether Taiwan is approaching a bear market, conventionally associated with a 20% decline. Lawmakers also raised concerns about risk management and the future of day-trading tax relief, which is due to expire at the end of 2027. The commission plans public hearings in February and March next year before making a final assessment later that year.

Sentiment Analysis

• Overall tone: Mixed and cautious. The article describes heightened market volatility and a retreat that has reached 17%, alongside concerns that a further decline could meet the traditional 20% bear-market threshold. This framing conveys uncertainty without asserting that a bear market has begun.


• Regulatory stance: Neutral and measured. Peng emphasizes respect for market mechanisms and says no short-selling limits, short-selling ban, or other stabilization intervention is planned for now. The position is conditional: authorities may act if the market becomes irrational or ceases to function properly.


• Risk outlook: Cautious. The article notes warnings about possible sharp market swings and stresses that investment always carries risk. Banks are encouraged to retain capital rather than distribute all profits as cash dividends.


• Policy outlook: Open-ended. Views on extending the day-trading tax reduction differ. Public hearings and a later assessment are planned, so the article reports a process rather than a decided outcome.

Article Text

Recent volatility in Taiwan’s stock market has prompted lawmakers to ask whether the market is entering a bear phase and what tools the government might use to contain instability. At a Legislative Yuan Finance Committee hearing on the 19th, Financial Supervisory Commission Chairman Peng Jin-long said the regulator currently has no plan to impose short-selling restrictions, prohibit short selling, or intervene in trading. He said the authority’s first responsibility is to respect market mechanisms while the market continues to operate rationally.

Kuomintang legislator Lai Shyh-bao noted that Taiwan stocks had fallen 17% from their recent high. He said a decline of 20% is traditionally used to define a bear market and asked whether Taiwanese equities remained attractive, given their relatively high price-to-earnings ratio. Lai also asked whether the regulator had tools such as a short-selling limit, a short-selling ban, or an intraday stabilization mechanism.

Peng said market participants naturally hold different expectations and interpretations about whether prices will rise or fall. As a market regulator, he said, the commission does not make forecasts or express expectations about the future direction of stocks. Instead, it evaluates whether market activity is functioning appropriately.

Peng described respect for market mechanisms as a central principle of financial supervision worldwide. When buyers and sellers can absorb information and trade freely, the authorities should respect those transactions. Government action is appropriate, he said, when market behavior becomes irrational or the market fails. In his assessment, information disclosure in Taiwan’s market remains adequate, trading is rational, and there is no evidence of artificial distortion. On that basis, the commission is not currently planning short-selling restrictions, a ban on short selling, or other measures to stabilize prices through intervention.

Legislator Lin Te-fu referred to warnings by well-known bearish investor Michael Burry (麥可貝瑞) that the US stock market may have peaked. He asked whether markets could face severe turbulence and how households and banks should manage assets and risk. Peng replied that markets are always uncertain. Although domestic banks have recorded repeated highs in profits in recent years, he said he had reminded the Bankers Association that institutions should prepare during prosperous periods by building up resources.

Peng advised banks not to distribute all earnings as cash dividends when profits are strong. Retaining capital, he said, can improve their capacity to absorb future pressures and withstand risks. For individual investors, he emphasized that investing involves risk at any time and urged them to remain rational and pay attention to risk management. His remarks focused on preparation and resilience rather than predicting a particular market outcome.

Lin also cited the structure of Taiwan’s retail market. Individual investors account for about 53% of trading, he said, while the proportion of individual investors who conduct day trading is as high as 54.36%. The current tax reduction for securities transaction tax on day trades is scheduled to expire at the end of 2027. Lin suggested that extending the reduction could help support the stable development of the securities market.

Peng said the possibility of extending the day-trading tax reduction has been discussed in the Legislative Yuan several times, and opinions differ. Positions include supporting an extension, opposing it, favoring gradual adjustments, allowing the measure to phase out over time, or adding other control mechanisms. The commission plans to hold public hearings in February and March next year to gather views from different parties. It will then submit its final assessment proposal in the second half of next year. No decision on whether to extend the tax relief has yet been announced.

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