The nation's main stock index plumbed new lows yesterday as margin calls and overnight losses on Wall Street led investors to dump shares. In reaction to the downturn, finance officials enacted six measures to address the situation. One of two key changes included halving the daily downward volatility limit on stock movements from 7 percent to 3.5 percent. Officials didn't say how long the limitation would remain in place. In addition, the Ministry of Finance proposed allowing foreign institutional investors to buy up to 75 percent of the shares of a single listed company, up from the current 50 percent limit.
Analysts say losses in New York prompted Taiwanese investors to unload shares.
In addition, the Dow Jones Industrial Average declined 1.14 percent to close below the psychologically important 10,000 level. Also putting downward pressure on shares were margin calls, whereby investors are forced to sell shares in order to pay back loans that had been used earlier to purchase stocks. Chen said that worldwide bearish sentiment and political problems on the domestic front have eroded investor confidence. Most securities analysts predict that the Taiwan stock market is going to test new lows in the near-term and consolidate in the next few months before rebounding. Intervention in the stock market by the stabilization fund will be Lin's responsibility from now on.