Taiwan Stock Market Drops Nearly 5,000 Points in One Week—What Went Wrong? Exchange Warns of Stabilization Measures if Necessary

Recently, due to pullbacks in U.S. semiconductor and AI-related stocks, geopolitical tensions in the Middle East, and uncertainty surrounding major central banks' interest rate policies, global stock markets have experienced heightened volatility. Today (29th), the Taiwan stock market suffered another heavy blow. Although it narrowly held above the 40,000-point mark by the close, it has dropped nearly 5,000 points in just one week—from last Wednesday’s closing of 44,825.78 points—making the correction extremely rapid and catching many investors off guard.

The Taiwan Stock Exchange (TWSE) noted that major global markets have weakened simultaneously, but the Taiwan Weighted Index has still gained 38.24% year-to-date, outperforming other major Asian markets. Liquidity remains ample, with the daily average trading value in the centralized market exceeding NT$1 trillion since the beginning of the year.

Margin Maintenance and Forced Liquidation Are Based on Overall Account Status

As the stock market continues to decline, concerns have mounted over margin trading maintenance ratios and margin calls. The TWSE explained that according to the 'Operational Guidelines for Securities Firms Handling Securities Financing and Short-Selling Business,' the margin maintenance ratio is calculated on a consolidated basis (including both financing and short-selling), covering both listed and OTC securities. Therefore, margin calls and forced liquidations (i.e., 'forced sales') cannot be determined by the maintenance ratio of a single stock alone, nor does a single stock falling below a 130% maintenance ratio automatically trigger a forced sale.

The TWSE emphasized that the individual stock financing maintenance ratios cited externally do not account for additional collateral deposits. Investors should carefully assess such data when inferring market trends. As of yesterday (July 28), the overall account maintenance ratio across the entire market for unrestricted loans remains far above the regulatory margin call threshold of 130%, indicating sufficient collateral coverage. However, actual margin call and liquidation statuses should be determined based on the individual consolidated maintenance ratios provided by securities firms.

In response to rapid market changes, the TWSE urges investors to carefully evaluate their risk tolerance and base investment decisions on corporate earnings, industry prospects, and long-term value, rather than unverified misinformation or market rumors. The exchange will continue to push listed companies to promptly and fully disclose material information, enhancing timeliness and transparency to protect investor rights and market order.

Listed Companies Show Resilient Growth

The TWSE stated that supported by strong demand for AI, high-performance computing (HPC), and cloud services, Taiwan’s exports and export orders remain robust, with overall economic activity staying vibrant. In June, exports reached USD 74.83 billion, up 40.3% year-on-year, marking 32 consecutive months of growth. First-half exports totaled USD 416.66 billion, a record high for the period, up 47.1% year-on-year. June export orders hit USD 95.26 billion, up 59.4% year-on-year, setting a new monthly record. First-half export orders reached USD 504.1 billion, up 50.9% year-on-year, also a record high for the period.

Additionally, according to the National Development Council’s June economic report, the economic indicator signal remained a 'red light'—indicating 'booming' conditions—for the seventh consecutive month, signaling sustained strengthening of domestic economic momentum.

The TWSE reported that total revenue for all listed companies in June reached NT$5.481 trillion, up 44.71% year-on-year. Cumulative revenue for the first six months reached NT$29.1955 trillion, up 35.93% year-on-year. First-quarter pre-tax net profit for all listed companies totaled NT$1.8634 trillion, up 59.88% from the same period last year, reflecting resilient corporate growth.

Looking ahead, Taiwan’s Directorate General of Budget, Accounting and Statistics (DGBAS), Central Bank, Academia Sinica, and Taiwan Institute of Economic Research have revised their 2024 GDP growth forecasts upward to 9.64%, 9.45%, 10.16%, and 10.38%, respectively. AI demand and strong export performance continue to support Taiwan’s economy. Recent earnings briefings from key listed companies also indicate sustained growth in demand for AI, HPC, and advanced process technologies.

For example, TSMC has raised its full-year revenue growth forecast and capital expenditure, continuing to expand its advanced process capacity—reflecting industry confidence in the long-term potential of these sectors.

Stabilization Measures Will Be Taken in Coordination with Regulators if Necessary

The TWSE emphasized that it will closely monitor international political and economic developments and market trading conditions to maintain fair, orderly, and transparent trading. It will continue urging listed companies to disclose material information promptly and encourage them to consider buybacks of treasury shares at appropriate times, based on financial health, cash flow, corporate credit, and shareholder interests.

The TWSE noted that if the stock market experiences irrational consecutive declines or significantly increased volatility, it will cooperate with regulatory authorities and implement stabilization measures as appropriate to ensure stable market operations.