Taiwan Stock Market Drops Sharply; Exchange Plans Further Stabilization Measures

Taiwan’s stock market experienced a significant decline on Monday, with the benchmark index plunging nearly 10% in its first trading session since the announcement of new US import tariffs.

This sharp drop, the largest in over a year, came as the market returned from a two-day holiday. The steep losses reflected investor concerns over the potential impact of the tariffs, particularly on Taiwan’s economy, which is highly integrated into global supply chains.

Following the market’s opening, Taiwan’s benchmark index fell to its lowest point in over a year, approaching its largest one-day percentage drop since at least 1990, according to LSEG data. The sharp decline was driven by panic selling, with Taiwan Semiconductor Manufacturing Co. (TSMC) and Foxconn both hitting the 10% circuit breaker, marking a significant blow to the market. While semiconductors are not directly targeted by the new tariffs, Taiwan’s trade-dependent economy remains vulnerable, with the tariffs putting pressure on industries reliant on exports.

In response to the market volatility, Taiwan’s financial regulator announced measures to curb short-selling through the week, aiming to mitigate further instability. These temporary restrictions on short-selling are designed to provide some relief from potential market turmoil resulting from the new tariffs. Taiwan’s top financial authorities, including Taiwan Stock Exchange Chairman Sherman Lin, have also signaled that they are prepared to implement additional stabilization steps if necessary.

Despite the market turmoil, Taiwan’s government has expressed confidence in its economic resilience. President Lai Ching-te emphasized that Taiwan would work to reduce tariff impacts through increased purchases from and investments in the United States. The government has already announced a T$88 billion ($2.65 billion) support package for companies impacted by the new tariffs, as part of efforts to protect its economy from the fallout.

The sharp declines in Taiwan’s stock market have sparked concerns about a potential recession, with analysts suggesting that the risk of economic contraction has risen. Allen Huang, vice president at Mega Financial’s securities investment unit, stated that the likelihood of a recession could exceed 50% if the current market conditions persist. However, experts also caution that the situation remains fluid, as it is uncertain whether US President Donald Trump’s tariff policies will change in the near future.

The latest developments come after a global selloff triggered by Trump’s new tariff hikes, which have affected Taiwan’s semiconductor giants. While the tariffs do not specifically target semiconductor exports, Taiwan’s chip industry, particularly TSMC, has been caught in the crossfire of the broader trade tensions. TSMC’s US-traded shares saw a 14% drop on Thursday and Friday, while Taiwan’s stock market remained closed. Concerns about rising tariffs and the impact on global supply chains have compounded the negative sentiment surrounding Taiwan’s market.

The market’s decline also comes amid broader concerns over geopolitical tensions and the impact of artificial intelligence investments, which have weighed on Taiwanese stocks this year. As of the last week of March, the benchmark index was underperforming MSCI’s Asia Pacific index by 8.5 percentage points, and Goldman Sachs downgraded Taiwan equities to “underweight,” citing the island’s high exposure to U.S. exports.

In the face of these challenges, Taiwan’s financial regulator is taking additional steps to stabilize the market. The new measures, which include increasing margin requirements and limiting securities lending, aim to prevent further market volatility and encourage investor confidence. The new short-selling restrictions are expected to remain in place until April 11.

Taiwan’s currency, the Taiwan dollar, also experienced a decline, with foreign investors pulling a record $13 billion from Taiwanese securities last month. The currency’s weakness has made it one of the worst-performing currencies in Asia, and analysts expect the downward trend to continue.

Reuters and Bloomberg contributed to this report.