Taiwan Curbs Short Selling and Readies $15bn Fund After Worst Market Week Since 2001

Taiwan has moved to steady its stock market after a brutal week of selling, curbing short selling and authorising the use of a NT$500 billion (about $15 billion) stabilisation fund as emergency measures take effect on Monday.

The Financial Supervisory Commission said intraday orders to sell borrowed shares will be capped at 3% of a stock’s average daily trading volume over the previous 30 days, down from 30%. The minimum margin requirement for short positions rises to 130% from 90%, making it considerably more expensive to bet against the market.

Separately, the Finance Ministry said the National Financial Stabilization Fund is prepared to deploy its NT$500 billion pool to support the market if needed. The fund’s management committee authorised its executive secretary to intervene on Friday, 6 November, in what is the fund’s tenth intervention since it was set up in 2000.

A record plunge on Friday

The intervention followed a week in which the benchmark Taiex lost 12.19%, its worst weekly performance since 2001 and the largest weekly points fall in its history — a drop of 5,510 points.

On Friday alone, the index plunged as much as 9% in intraday trading, a record 3,737.67-point fall during a session, before recovering some ground to close down 4.51% at 39,701.64. At its low of 37,837.05, the index had fallen more than 20% from its 6 October high of 49,968.92, putting it in bear-market territory.

Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker and the dominant weight in the index, led the slide. Its shares in Taipei fell more than 4% on Friday, after its US-listed shares dropped nearly 11% the previous day. TSMC alone accounts for more than 40% of the Taiex’s market value.

A rout that began on Wall Street

The selling in Taipei was part of a global retreat from artificial intelligence shares that began in the United States. The Philadelphia Semiconductor Index fell more than 12% on Thursday, its worst day since March 2020, and the Nasdaq fell 5.5% into correction the same day. The Nikkei entered bear market in Tokyo on Friday as the rout spread across Asia.

Investors have grown uneasy about the scale of spending on AI infrastructure and whether the returns will justify it, and the doubts hit chipmakers and their suppliers hardest. Taiwan, which makes most of the world’s most advanced chips, was directly in the firing line.

Foreign investors have been heading for the exits for weeks. They sold a net NT$994.3 billion (about $30.3 billion) of Taiwan Stock Exchange shares in October, the largest monthly figure on record, and selling continued into November. The Finance Ministry pointed to the sustained foreign selling as evidence that confidence had weakened.

The measures taking effect on Monday

The short-selling curbs and the stabilisation fund authorisation both take effect on Monday, 9 November. The fund has not said how much it will spend, or when, and the law caps its total resources at NT$500 billion.

The package is almost identical to the one Taipei deployed in April 2025, when US reciprocal tariff announcements sent the Taiex down 9.7% in a single session. That intervention ran for 279 days before the fund stood down in January this year.

Regulators have also urged listed companies to consider share buybacks to support their stock prices. The measures may steady trading in the short term, but they cannot settle the underlying question driving the sell-off: whether demand for AI chips and the returns on AI investment will hold up.

What to watch next

Monday’s trading will be the first test of whether the measures can halt the slide. Investors will watch whether foreign selling eases, whether TSMC steadies, and whether the stabilisation fund actually steps in to buy.

The broader picture also matters for the United States. Taiwan’s chip industry sits at the centre of the global AI supply chain, and the same doubts that drove the Taiex into a bear market have already hit American chip stocks, including Nvidia, whose shares have been caught up in the wider sell-off. How Taipei’s markets respond this week will be read in Washington and on Wall Street as a measure of whether the AI trade is stabilising — or still falling.