Taiwan to Reveal Stock Movement-Limit Rules Tomorrow

By Tim Culpan

Oct. 18 (Bloomberg) -- Taiwan will announce tomorrow whether it will retain a narrowed limit on stock price movements as governments seek measures to stabilize markets amid a global financial crisis.

A decision to continue enforcing a limit of 3.5 percent on one-day share price declines, or restore the previous 7 percent cap, will be announced at 6 p.m. tomorrow in Taipei, Gordon Chen, chairman of Taiwan's Financial Supervisory Commission, said at a press conference late last night, rebroadcast today on TV station CTi.

Taiwan on Oct. 15 said it would extend the use of its National Stabilization Fund to support the market by at least one month. Governments from Washington to London are buying stakes in banks, guaranteeing inter-bank loans and pumping liquidity into markets to stave off a global financial collapse.

A ban on short-selling and guarantees for all bank deposits are among other measures Taiwan's Cabinet has implemented to stem a slide in stock prices amid the global crisis.

``It's not good and it's quite useless to limit the stock price movement,'' said Michael On, president of Beyond Asset Management Co. in Taipei. ``The market will find its fair value on its own, and these limits get discounted anyway.''

Relief Package

South Korea will announce a relief package tomorrow as part of measures Finance Minister Kang Man Soo described yesterday as ``preemptive, decisive and sufficient'' to stabilize that nation's financial system. The won fell 9.7 percent against the U.S. dollar on Oct. 16 amid a shortage of U.S. currency as businesses hoarded the dollar.

Measures the South Korean government may outline tomorrow include supplying a further $30 billion to boost liquidity, Yonhap News agency reported today, citing government officials it didn't identify.

Taiwan's Taiex index dropped 3.3 percent last week, its fifth weekly decline, widening the benchmark's losses this year to 42 percent, compared with a 45 percent decline in the MSCI Asia-Pacific Index. Taiwan's dollar fell to NT$32.55 against the U.S. dollar yesterday as investors repatriated funds from the stock market to cover fund redemptions.

Foreign investors have withdrawn $2.3 billion from Taiwan's securities markets this month, $2.7 billion from South Korea, and $4.7 billion from Japan, according to Bloomberg data.

Taiwan doesn't let stock prices move more than 7 percent from the previous day's close. Regulators cut the downward limit in half between Oct. 13 and Oct. 17 to stabilize the market.

The U.K. government has set aside as much as 50 billion pounds ($86 billion) for equity stakes in banks, provided 250 billion pounds in inter-bank loan guarantees and 200 billion pounds in a special liquidity program. U.S. lawmakers have approved a $700 billion bailout package to stop the collapse of the country's banking system.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.