Taiwan Stock Market Plunges 2,030 Points; Retail Investors Still Holding On as Margin Calls Loom

Global stock markets are collapsing, and Taiwan's equity market (Taiwan Stock Exchange) opened and closed sharply lower today (28th), plunging 2,030.83 points (4.65%) to close at 41,603.36. According to brokerage sources, margin call notices have been issued in recent days, but most clients are still holding on. 'Very few are liquidating on their own. If there’s one more big drop tomorrow, it’ll be over,' one source said.

When investors use margin loans to buy stocks, if the 'market value of shares ÷ loan amount' falls below the 130% threshold, brokers issue margin calls requiring investors to deposit additional funds. Failure to comply results in forced liquidation—commonly known as a 'margin call' or 'forced sell-off.'

As of the 27th, Taiwan's margin maintenance rate stood at 150.23%, with outstanding margin debt totaling NT$568.7 billion. Institutional analysts estimate that for every 144-point drop in the index, the maintenance rate decreases by 1%. Based on this, if the main index falls below 41,250 points, widespread margin calls could be triggered. If U.S. markets fail to rebound tonight, Taiwan’s market may face another sharp decline tomorrow.

Institutional analysis indicates that although the market showed brief signs of resistance at yesterday’s close, the bullish momentum failed to sustain. Today, the market was again hammered, hitting a new low in the current correction phase. With the loss of the quarterly moving average line confirmed, the short-term technical outlook remains weak. Market participants are now closely watching earnings reports from U.S. tech giants and the Federal Reserve’s interest rate decision. Analysts advise investors to remain cautious and wait for signs of a market bottom.

Post-market data shows that the three major institutional investors collectively sold NT$116.939 billion today. Foreign investors sold NT$87.562 billion, proprietary traders sold NT$31.73 billion, while investment trusts bought NT$2.353 billion.

Looking at Taiwan Stock Index Futures (TX Futures) net positions, foreign investors increased their net short position by 3,556 contracts to 82,255 contracts. Among the top ten traders, the 'specific institutional investors' increased their full-month net short position by 4,029 contracts, reaching 2,020 contracts.

For options open interest, the highest call option OI for August is at 55,000 points, while the highest put option OI is at 34,000 points. For August Week 1 (W1), the highest call OI is at 47,500 points and the highest put OI at 39,800 points. The full-month put/call ratio dropped from 1.1 to 0.89. Foreign investors’ net position in TX call options was -NT$0.44 billion, while their net position in put options was +NT$1.36 billion.

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