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The Outstanding Amount of Margin Loans on The Taiwanese Stock Market

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Core prompt: Taipei, Oct. 30, 2012 (CENS)--The outstanding amount of margin loans on the Taiwanese stock market plunged NT$4.328 billion yesterday (Oct. 29), as

Taipei, Oct. 30, 2012 (CENS)--The outstanding amount of margin loans on the Taiwanese stock market plunged NT$4.328 billion yesterday (Oct. 29), as many margin traders have been forced to exit the market during the market downfall. Due to sharp decline in outstanding margin loans, the overall margin-loan maintenance rate dropped from 143% last Friday to 140.3% yesterday, approaching the alert line of 140% for triggering margin calls. 

Taiex Index shed 42 points yesterday, when many institutional investors sold stocks to stop loss and high-priced stocks, such as HTC and Genius Electronic Optical, led the fall. Some medium- and small-cap stocks also crashed, boosting the number of listed firms whose share prices dropped by the daily limit of 7% to 185.

 According to the statistics of Taiwan Stock Exchange, the outstanding amount of margin loans for Taiwanese stocks dropped below the NT$180 billion mark yesterday, to NT$179.9 billion, down NT$4.3 billion from the previous trading session. Analysts noted that if Taiwanese stocks drop further, the pressure for margin calls will step up, especially for the four industries of solar energy, LED (light-emitting diode), DRAM (dynamic random access memory), and FPD (flat panel display).

Yeh Hung-ju, a fund manager, remarked that despite exit of some margin traders, there is still room for further reduction in margin loans and in the short term, due to the effect of the publication of financial statements and exit of margin traders, performance of Taiex index is not promising and performances of individual stocks will vary, according to their different situation.

Li Shiu-li, general manager of Jih Sun Securities Investment Consulting, advised investors to stay away from life-insurance shares and weak electronic shares, as they will face heavy pressure for margin calls. Many stocks, such as China Life and Compal, witnessed surge in margin trading at high price levels. They will face heavy pressure of margin calls, should their share prices decline further.

(by Philip Liu)

 
 
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