TAIWAN’S STOCK CRASH DEEPENS; GOV’T ALARMED

Taiwan stocks sank for a third day, accelerating a rout that’s triggered the fastest liquidation of leveraged positions since 2018, Sofia Horta e Costa reported for Bloomberg News.

The Taiex fell as much as 3.4% on Thursday, taking the three-day loss to 11%. Forced selling has compounded this week’s losses, with the level of margin debt falling by a net NT$12.9 billion ($461 million) on Wednesday, according to exchange data compiled by Bloomberg.

That takes the two-day drop in leverage to NT$25.6 billion, showing traders faced margin calls by brokers to cover losses in their stock accounts.

The worry is that falling share prices will trigger a continuous downward spiral in Taiwan equities, adding to a long list of challenges facing investors in the $1.9-trillion market.

The value of margin debt surged 46% this year to about NT$274 billion at its peak at the end of April, the highest since 2011, traders said. By comparison, the Taiwan benchmark was up 19% in that period, an indication that people were taking out loans faster than stocks were appreciating.

The sharp reversal in Taiwan stocks is a warning to highly leveraged investors around the world.

The Taiex was the world’s best-performing equity gauge in the three years through April, surging almost 80% in US dollar terms, as a seemingly never-ending rally in tech shares pulled in retail investors. It’s now suffering the biggest drop globally.

Taiwan’s National Stabilization Fund Committee may hold a meeting soon to respond to the rout, finance minister Su Jain-rong said at a meeting of the legislature’s Finance Committee on Wednesday, according to the Taipei Times.

The fund last year pledged to back the stock market with as much as NT$500 billion as stocks crashed globally in March, while the Financial Supervisory Commission tightened rules on short selling.

WEEKLY FEATURE : TRUEMONEY PHILIPPINES BUCKS THE COVID-19 CHALLENGE