Taiwan bans short-selling of borrowed stocks at prices below the previous close; S. Korea to act 'pre-emptively' as largest ETF sees biggest weekly withdrawal
Shanghai: China isn’t the only country resorting to extraordinary measures to shore up its tumbling stock market.
Taiwan on Sunday slapped a ban on short-selling of borrowed stocks at prices lower than the previous day’s close, while South Korea’s finance ministry said it will act “pre-emptively" after the nation’s largest exchange-traded fund suffered the biggest weekly withdrawal since its inception 15 years ago. China itself said over the weekend it will allow pension funds to invest in stocks for the first time, while penalizing major shareholders at publicly traded companies for violating rules that limit stake sales.
Benchmark stock gauges in Taiwan, Hong Kong and Indonesia entered bear markets last week after sliding at least 20% from recent peaks as China’s surprise devaluation of the yuan and prospects for the first US interest-rate increase since 2006 triggered concern competitive devaluations will hurt economic growth and fund outflows will accelerate.
“Hopefully, Asian governments don’t panic from the current market turmoil and resort to knee-jerk decisions," said Sandy Mehta, the chief executive officer of Hong Kong-based Value Investment Principals. “Competitive currency devaluations can become a zero-sum game if all countries resort to it."
In South Korea, financial authorities were ordered to hold meetings to monitor the markets and implement measures when necessary, the country’s Financial Services Commission said.
Tensions between North and South Korea also drove the iShares MSCI South Korea Capped ETF, the largest exchange-traded fund tracking the country’s stocks, to its biggest weekly withdrawal since inception in 2000. Traders pulled $195.4 million from the ETF, whose top holdings include Samsung Electronics Co. and Hyundai Motor Co., in the five trading days ended 21 August, according to data compiled by Bloomberg.
Taiwan’s financial watchdog imposed the ban on short-selling of borrowed stocks and depository receipts, the Financial Supervisory Commission announced. The measure will take effect on Monday, it said.
While the rule doesn’t apply to brokerages and futures brokers who are shorting for hedging purposes, the regulator is working to encourage the financial industry to hold shares of listed companies, it said on its website. Taiwan’s benchmark index fell 5.2% last week.
In Indonesia, the nation’s largest fund manager is taking the slump that’s driven stocks into a bear market as the cue to start buying again.
BPJS Ketenagakerjaan, which manages around 193 trillion rupiah ($13.8 billion), will enter the equities market along with other state-owned institutional investors, Elvyn Masassya, its president director, said in a text message on Sunday. Shares are “relatively cheap," he said, without naming any.
China securities regulator said late Friday it will penalize major shareholders at publicly traded companies, such as Southwest Securities Co. and Guoxing Rongda Real Estate Co., for violating rules that limit stake sales.
The China Securities Regulatory Commission’s investigation focuses on whether shareholders sold their stakes beyond what rules allow, if they sold them during a moratorium period and whether they made timely disclosures, Zhang Xiaojun, a spokesman for the regulator in Beijing, told reporters. The benchmark Shanghai Composite Index plunged 4.3% on Friday, coming within one point of wiping out an 18% rebound since the 8 July low.
The State Council, or cabinet, on Sunday announced it will allow pension funds to invest in new products, including the stock markets, while restricting the maximum proportion of investments in equities to 30% of total net assets. Pension funds had net assets of 3.5 trillion yuan ($547 billion) by the end of 2014, the official Xinhua News Agency reported. Bloomberg