Taiwan and South Korea Announce Measures to Curb Tech Stock Rout as Taiex Falls 9%
Key Facts
Taiwan and South Korea announced measures to ease selling pressure in equity markets after Asian indexes fell amid growing concerns over investments in artificial intelligence and data centers. After trading closed on Friday, November 6, Taiwan’s market regulator said it would impose short-selling restrictions from November 9, while the finance ministry said it was ready to use the existing stock stabilization fund, valued at 500 billion Taiwan dollars, or 15 billion U.S. dollars. In South Korea, officials agreed to exempt brokerage firms from margin-loan maintenance requirements for three months starting Monday, November 9. Both measures aim to ease selling pressure, including forced liquidations of leveraged positions. The announcements followed a session of sharp declines in Taiwan and South Korea, amid concern that the tech stock shock could spread to Asian markets.
Taiwan’s Taiex fell as much as 9% during Friday’s session and entered bear-market territory before paring some losses later. It nevertheless ended the week with its biggest weekly loss since 2001, reflecting the scale of pressure on the market in recent days. Japan’s Nikkei also entered bear-market territory during the Asian sell-off that day. In South Korea, the Kospi fell more than 8% after the open, triggering a 20-minute suspension of trading in its listed shares. The index pared its losses during the session, but the sharp opening decline prompted authorities to act to contain market volatility.
Reuters coverage linked Asia’s tech stock declines to concerns that a Democratic victory in the U.S. midterm elections could bring greater regulatory scrutiny of artificial intelligence and slow data-center construction. The concerns spread to technology-heavy Asian markets, as worries grew over investments in AI and data-center projects. South Korean Finance and Economy Minister Lee Hyung-il said, "We cannot rule out the effects spreading to global stock markets." South Korean officials pledged to take measures to prevent local stocks from overreacting to external developments. The steps to support trading and curb forced liquidations come amid broader concerns about sector regulation and returns on infrastructure spending.
In South Korea, the new exemption applies to margin-loan maintenance requirements, which currently require brokerages to secure collateral worth at least 140% of the funds they lend investors to buy stocks. The exemption will last three months, starting November 9, and is intended to curb forced liquidations when collateral values fall. In Taiwan, the regulator announced short-selling restrictions after the market closed, and the finance ministry said it was ready to use the existing stabilization fund. The source did not announce the creation of a new fund or its actual activation. The difference between the two tools reflects Taiwan’s focus on short selling and South Korea’s on easing collateral requirements for investors who borrow.
South Korean authorities said they would monitor the chip industry, policies in major economies and capital flows, while preparing additional emergency measures if market volatility deepened. Regulators said they were preparing measures "that can be activated immediately if stock-market volatility deepens." These steps remain tied to market developments after the exemption begins on November 9, while authorities have not specified a deadline for the additional emergency measures in the available information. In Taiwan, short-selling restrictions take effect on the same date, while the ministry said it was ready to use the existing stabilization fund. Monitoring chip-sector developments, policies and capital flows remains part of the South Korean authorities’ response in the period ahead.