Taiwan Authorities Tighten Grip on Stock Market Amidst Overheating Fears

Taiwan's stock market is experiencing a significant cooling-down period as authorities move to curb speculative trading. The main stock index has doubled in value over the past year, drawing a massive wave of retail investors, with some reports indicating a phenomenon of "four loans for one household" to fund investments.

The central bank has repeatedly warned about the risks of an overheated stock market in its financial stability reports and meeting minutes. Household debt has reached NT$23.7 trillion, with a notable surge in housing loans and personal revolving credit. The proportion of personal revolving credit loans to total bank lending has climbed from approximately 7.07% at the end of 2022 to over 11.29% by mid-2024.

In response to the surge in domestic capital flowing into the stock market, financial authorities are implementing measures to stabilize it. The central bank is closely monitoring the use of personal revolving credit, requiring banks to verify that funds are not being used for stock speculation under the guise of renovation or business turnover. The Financial Supervisory Commission (FSC) is conducting targeted inspections of financial institutions to investigate leveraged operations, such as borrowing against multiple assets, and is raising collateral requirements for margin trading.

Furthermore, the FSC is strictly prohibiting investment firms from using exaggerated language like "guaranteed high dividends" in their marketing efforts for exchange-traded funds (ETFs). They are also tightening regulations on the use of stabilization funds, aiming to guide retail investors toward more rational investment decisions. The total scale of both active and passive Taiwan stock ETFs has reached NT$8 trillion, with monthly fixed investments exceeding NT$30 billion.