Taiwan Stocks Rebound as Short-Selling Curbs and State Fund Take Effect After AI Rout

The gain was the Taiex's largest since July 31 and broke a seven-session losing run, the longest since 2022, according to Bloomberg. Taiwan Semiconductor Manufacturing Co and MediaTek each rose at least 5% in early trading, Startup Fortune reported.

Few stock markets are as exposed to AI hardware spending as Taiwan's. TSMC alone makes up more than 40% of the market's total value, and the island's companies make most of the advanced chips and servers bought by US cloud providers. Last week's slide, driven by concern that US data centre spending could slow, turned a correction in global AI stocks into a problem the Taiwanese government judged it had to address directly.

The measures were announced on Friday, November 6. The Financial Supervisory Commission cut the cap on intraday short-sale orders using borrowed shares to 3% of a stock's average daily volume over the previous 30 business days, down from 30%. It also raised the minimum margin for short sales to 130% from 90%. Both rules took effect on Monday. The regulator also encouraged listed companies to buy back their own shares.

The Ministry of Finance said the National Financial Stabilization Fund would act to steady the market, citing continued foreign selling as evidence of "a significant deterioration in market confidence". The fund has been authorised to use up to NT$500 billion, which by BigGo Finance's count makes this its tenth market-support operation. The figure is a ceiling rather than a commitment. The fund's committee left it to its executive secretary to deploy money as conditions warrant and did not say when buying would start or how much would be spent.

Premier Cho Jung-tai told reporters on Friday that he had asked the commission to monitor the market closely and respond flexibly. Taiwan last imposed trading curbs in 2025, during the market turmoil over US tariffs.

The Worst Week in a Generation

Friday's session showed the scale of the pressure. The Taiex fell as much as 9% intraday, according to Bloomberg, before bargain buying around midday trimmed the loss. It closed at 39,701.64, down 1,873 points or 4.51%, the fourth-largest one-day point decline on record. TSMC fell about 10% at one point and closed down 4.69% at NT$2,135.

Over the week, the index lost 5,510 points, more than 12%, and about NT$18 trillion of market value, Startup Fortune reported, citing BigGo Finance. It also cited Taipei Times figures showing foreign investors sold a net NT$705.7 billion of shares on the main board over the seven losing sessions. Bloomberg described it as the island's worst week in a quarter of a century.

The rebound also had help from Wall Street. The Philadelphia Semiconductor Index rose 4.21% in the previous US session, and TSMC's US-listed shares gained 6.33%. But Taiwan index futures rose only about 1.6% in the night session, suggesting some traders doubt the bounce will last.

Short-selling curbs and state buying can slow forced selling, but they do not settle the question behind the rout: how long the largest US technology companies will keep spending heavily on AI servers. The next test comes on Tuesday, November 10, when TSMC is due to report its October revenue.