Taiwan Activates NT$500bn Rescue Fund and Curbs Short Selling After Its Worst Week Since 2001
Taiwan has activated its NT$500 billion rescue fund and imposed new limits on short selling after its stock market lived through one of the worst weeks in its history. On Friday, 6 November 2026, the island’s benchmark index plunged by a record amount within minutes of opening, its most valuable company hit its daily limit down, and by the end of the week the market had fallen into bear market territory. The government has now stepped in with emergency measures, including a multi-billion-dollar rescue fund and new limits on short selling, which take effect today, Monday 9 November.
This article explains what happened in Taiwan’s stock market, why the world’s biggest chipmaker sits at the centre of the storm, what spooked investors, and what the government’s rescue plan can — and cannot — do.
What happened on Friday
Friday, 6 November, started badly and got worse within minutes. Taiwan’s benchmark stock index, the Taiex, fell by a record 3,737.67 points shortly after trading began at 9 a.m., dropping to 37,837.05. That was the largest intraday point fall in the market’s history, a drop of about 9 per cent from the previous day’s close. The index fell below the 40,000-point mark and below its 240-day moving average of around 38,827 points.
Bargain hunters stepped in later in the day and the market recovered about half of its losses. Even so, the Taiex closed down 1,873.08 points, or 4.51 per cent, at 39,701.64 — the fourth-largest single-day point loss the market has ever recorded. Trading was heavy, with turnover reaching 1.25 trillion New Taiwan dollars.
The damage did not stop there. Over the full week, the Taiex lost 5,510 points, or 12.19 per cent — its worst weekly fall since September 2001. And measured from its record high of 49,968.92 points on 6 October, the index has now fallen 20.55 per cent in just one month. That matters, because a fall of 20 per cent or more from a recent peak is what investors call a bear market: a formal label for a long, deep downturn.
Why TSMC matters so much
At the heart of the sell-off is one company: Taiwan Semiconductor Manufacturing Co., known as TSMC. It is the world’s largest maker of advanced computer chips, and it makes the processors that power artificial intelligence systems, smartphones and data centres around the world. It is also enormous in Taiwan’s own market, accounting for more than 40 per cent of the Taiex’s total value. When TSMC falls, the whole market falls with it.
On Friday, TSMC hit its daily limit down — the lowest price it is allowed to reach in a single day under Taiwan’s trading rules — at NT$2,020, a fall of NT$220. That was the largest single-day price drop in the company’s history in absolute terms, and it wiped about NT$5.7 trillion off TSMC’s market value in a single session. The shares recovered some ground later and closed 4.69 per cent lower at NT$2,135, but the damage was done.
TSMC was not alone. MediaTek, another major chip designer, also hit its daily limit down at NT$3,115. Delta Electronics hit its limit down at NT$1,020. Foxconn, known formally as Hon Hai Precision Industry and famous as the company that assembles Apple’s iPhones, fell by more than 9 per cent during the session. The selling was concentrated in technology and semiconductor shares — the very stocks that had driven the market to record highs only a month earlier.
Why are investors suddenly selling?
The trigger came from the United States. On Thursday, 5 November, Wall Street suffered a sharp sell-off of its own: the S&P 500 fell 4.4 per cent, the Nasdaq Composite dropped 5.5 per cent, and the Philadelphia Semiconductor Index — which tracks the biggest US chip companies — plunged 12.2 per cent. Asian markets followed the next day, with South Korea’s Kospi falling more than 8 per cent and Japan’s Nikkei also sliding sharply.
Behind the selling is a growing worry about artificial intelligence. For the past two years, investors have poured money into AI shares on the belief that spending on AI data centres — the giant buildings full of computer chips that train and run AI systems — would keep growing fast. Now doubts are creeping in. Some investors worry that companies are borrowing too much to build data centres, that the returns on that spending may be slower than expected, and that AI share prices simply rose too far, too fast. The US midterm elections added to the uncertainty, with investors unsure how American policy on AI and data centres might change.
Foreign investors have been heading for the exit in Taiwan for weeks. They sold a net NT$994.316 billion of Taiwanese shares in October — the largest monthly figure on record. The selling continued into November, reaching NT$524.4 billion in the first days of the month up to Friday. On Friday alone, foreign institutions were net sellers of more than NT$91 billion of shares. When the biggest buyers become the biggest sellers, markets fall fast.
It is worth keeping the scale in mind. Taiwan’s market hit its all-time high of nearly 50,000 points on 6 October, after a spectacular run driven by AI excitement. A fall of one-fifth from that peak in a single month is a reminder of how quickly sentiment can turn when the story that drove prices up starts to be questioned.
How the government is fighting back
After trading closed on Friday, Taiwan’s government announced two sets of emergency measures, both designed to steady the market when trading resumes.
First, the Ministry of Finance authorised the activation of the National Financial Stabilization Fund, a government rescue fund worth NT$500 billion — about US$15.26 billion. The fund’s steering committee met on Friday afternoon and gave its executive secretary the power to buy shares and support the market as conditions require. This will be the fund’s tenth intervention since it was created, and the first in less than ten months. The fund did not say when it would start buying, or how much it would spend — the NT$500 billion is a ceiling, not a promise to spend it all.
Second, the Financial Supervisory Commission, Taiwan’s market regulator, announced temporary curbs on short selling, effective from today, Monday 9 November. Short selling is a way of betting that a share price will fall: a trader borrows shares, sells them, and hopes to buy them back later at a lower price. In a panic, heavy short selling can push prices down further and faster. The new rules cut the volume of intraday short-sale orders for borrowed shares to 3 per cent of a stock’s average daily trading volume over the previous 30 days, down from 30 per cent. The regulator also raised the minimum amount of money a trader must deposit to short sell a stock — the margin requirement — from 90 per cent to 130 per cent of the stock’s value, making the bet much more expensive. The commission also encouraged listed companies to buy back their own shares, which can help support prices and signal confidence.
These are classic crisis-fighting tools, and Taiwan has used them before. The stabilization fund has stepped in during past panics, including during the Covid crash and earlier bouts of market turmoil. But the measures have limits. They can slow a panic and give the market breathing room; they cannot fix the underlying worry about AI spending, and they cannot force foreign investors to return. As one market report put it, the measures may steady trading, but they cannot resolve the uncertainty about AI demand and investment returns.
Why it matters beyond Taiwan
Taiwan’s market matters far beyond the island for one simple reason: almost every advanced AI chip in the world is made there. TSMC manufactures the most powerful processors for companies including Nvidia, Apple and AMD. When TSMC’s shares fall sharply, it is not just a Taiwanese story — it is a signal about how investors view the whole AI boom.
The rout also spread across Asia on Friday. South Korea’s Kospi fell more than 8 per cent, triggering a trading curb, and Japan’s Nikkei sank around 6 per cent. The pattern was the same everywhere: chip and AI shares led the fall. For ordinary savers, the lesson is a familiar one. Markets that rise fast on a single story can fall just as fast when the story is questioned — and Taiwan, where one company makes up more than 40 per cent of the market, felt that harder than almost anywhere else.
For Pakistan and the wider region, the direct impact is limited. Pakistan’s stock market is not closely linked to Taiwan’s, and the sell-off was driven by global technology shares rather than by anything in South Asia. But the episode is a reminder that global markets are connected: a bad day on Wall Street can become a record-breaking bad day in Taipei within hours, and the same worries about AI spending have already hit markets in South Korea and Japan.
What happens next
All eyes are now on Monday’s trading, the first session under the new short-selling rules and with the stabilization fund on standby. Investors will be watching whether the government’s measures calm the market, or whether selling resumes once trading reopens.
There are two other dates to watch. Morgan Stanley is due to announce the results of its November index review on 11 November, with any changes taking effect at the close of trading on 30 November. Index reviews can move large sums of money, because funds that track the index must buy or sell shares to match it. And the market will be listening for any fresh signal — good or bad — about AI data centre spending from the big American technology companies, since that was the worry that started the sell-off.
The bigger question will take longer to answer. Is this a healthy correction after a spectacular run, or the start of a longer downturn in AI shares? A month ago, Taiwan’s market was at a record high. Today it is in a bear market, its government has opened its rescue fund, and its most important company has lost trillions in value in a day. The coming weeks will show whether the panic has passed — or whether it has only just begun.
Frequently asked questions
What is the Taiex?
The Taiex is Taiwan’s benchmark stock market index. Its full name is the Taiwan Stock Exchange Capitalization Weighted Index, and it tracks the performance of the shares listed on the Taiwan Stock Exchange. When people say “the Taiwan market fell”, they usually mean the Taiex fell.
What does it mean that Taiwan’s market is in a bear market?
A bear market is the label investors use when a market has fallen by 20 per cent or more from a recent peak. The Taiex has fallen 20.55 per cent from its record high of 49,968.92 points on 6 October, so it now qualifies. A bear market does not mean shares will keep falling — markets have recovered from bear markets many times — but it signals a deep and serious downturn.
What is TSMC and why does it matter so much?
TSMC, or Taiwan Semiconductor Manufacturing Co., is the world’s largest maker of advanced computer chips. It makes the processors used by Nvidia, Apple, AMD and many others, and it produces almost all of the world’s most advanced AI chips. It accounts for more than 40 per cent of the Taiex’s total value, so its share price has an outsized effect on the whole market.
What is short selling, and why has Taiwan limited it?
Short selling is betting that a share price will fall. A trader borrows shares, sells them at today’s price, and hopes to buy them back cheaper later. In a market panic, heavy short selling can push prices down further. Taiwan’s regulator has cut the amount of short selling allowed and raised the cash traders must put up, to make it harder and more expensive to bet against the market.
What is Taiwan’s National Financial Stabilization Fund?
It is a government fund of up to NT$500 billion (about US$15.26 billion) that can buy shares to support the market during periods of panic or extreme volatility. It has been used nine times before, and its activation on 6 November is the tenth. The fund’s managers decide when and how much to buy; the authorisation itself does not mean all the money will be spent.
Has anything like this happened before?
Yes. Taiwan’s market has suffered sharp falls before, including during the 2008 financial crisis, the Covid crash of 2020, and earlier technology sell-offs. The Taiex’s worst weekly loss before this one was in September 2001. Stabilization fund interventions and short-selling curbs have been used in past crises too.
Sources
- Focus Taiwan (Central News Agency), “Taiex plunges over 3,700 points in early trading as TSMC hits limit down”, 6 November 2026: https://focustaiwan.tw/business/202611060006
- Taipei Times, “Taiwan to activate NSF amid stock rout”, 7 November 2026: https://www.taipeitimes.com/News/front/archives/2026/11/07/2003867305
- The Edge Singapore, “Taiwan imposes short-selling limit after stock market rout”: https://www.theedgesingapore.com/news/china/taiwan-imposes-short-selling-limit-after-stock-market-rout
- Moneycontrol, “Taiwan steps in to calm investor nerves after bruising AI rout”, 6 November 2026: https://www.moneycontrol.com/news/markets/global-markets/taiwan-steps-in-to-calm-investor-nerves-after-bruising-ai-routtaiwan-stepped-in-to-try-to-calm-investor-nerves-after-a-deepening-selloff-in-artificial-intelligence-shares-drove-the-island-s-benchmark-14073071.html/amp
This article is for general information and education only. It is not legal or financial advice.
