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Bigger stock market fluctuations could benefit small cap stocks

Bigger stock market fluctuations could benefit small cap stocks

Taipei, Jan. 3 (CNA) A plan under evaluation by Taiwan's top financial regulator to allow stocks to fluctuate in a larger daily range could encourage investors to buy into small and medium cap stocks, according to the GreTai Securities Market (GTSM). The GTSM, which operates the local over-the-counter market, said that bigger stock market fluctuations are expected to bring more transactions into the local bourse, which is expected to help small and medium cap stocks move higher. Compared with the main board, stocks traded in the over-the-counter market are smaller in terms of capital size, and when turnover increases, it is easier for them to move. Tseng Ming-chung, chairman of the Financial Supervisory Commission (FSC), said earlier this week that the regulatory body is studying the feasibility of allowing stocks on the main board and on the over-the-counter market to go up or down by 10 percent in a single trading session, a change from the current 7 percent maximum upward or downward fluctuations. Tseng said that Taiwan's is among the most restrictive of fluctuations in Asia. China limits daily stock price fluctuations to 10 percent, South Korea to 30 percent, and Japan to between 14 and 30 percent. Singapore and Hong Kong do not impose any limits on daily price changes. The relaxed rules are expected to take effect in the second half of this year. The GTSM also said that a move in late December by the Legislature to postpone a stock capital gains tax targeting major investors until 2018 could prompt more local investors to come back to the trading floor. Major local players tend to pick up small- and medium-sized stocks in the local bourse, while foreign institutional investors favor large-cap stocks in the market. On Jan. 26, the Legislative Yuan passed an amendment to put off the implementation of the capital gains tax from 2015 to 2018 for investors who trade more than NT$1 billion (US$31.55 million) worth of shares a year. Wu Sou-shan, chairman of the GTSM, said that both developments are expected to boost daily turnover in the local equity market gradually. He predicted that turnover would grow 5-7 percent from a year earlier over the course of 2015, adding that trading volume is expected to be higher in the second half of this year than the first half. Once the relaxation of the daily fluctuation limits is finalized, however, investors should raise their risk control as the local bourse could be more volatile than before, he added. The index on the over-the-counter market rose 8.34 percent to close at 140.38 points in 2014. The gains surpassed the 8.07 percent rise recorded on the main board in the year. (By Hang Ting-ting and Frances Huang)


Updated : 2021-09-18 14:36 GMT+08:00