HighIV Macro Policy & Sovereign Debt6 November 2026, Friday
Taiwan deploys its stabilisation fund as the Taiex breaks below 40,000
The Taiex fell 1,873.08 points (4.51%) to 39,701.64 on 6 November, and the National Financial Stabilization Fund was authorised to intervene in the market the same day. It is the 10th intervention since 2000 by the 500 billion NT dollar fund, coming about 10 months after its previous mission ended in January.
According to Focus Taiwan, the sell-off was triggered by fears of curbs on data centre investment after Democrats won both chambers of Congress in the 3 November US midterms, along with governorships including Texas, a major data centre hub. The Taipei Times reports that the Nasdaq had fallen 5.5% the previous night, its worst day since April 2025. TSMC, which alone makes up more than 40% of market capitalisation, hit its 10% limit-down intraday and closed 4.69% lower at 2,135 NT dollars.
The real constraint is foreign capital flight. Foreign institutional investors sold a record net 994.32 billion NT dollars in October and a further 524.4 billion in November up to 6 November. The central bank sold dollars in October to defend the Taiwan dollar, and foreign exchange reserves fell by 4.308 billion dollars to 596.437 billion at the end of the month, below the 600 billion mark. Foreign holdings of equities, bonds and deposits equalled 292% of reserves at the end of October.
The index has fallen 20.55% from its 6 October peak of 49,968.92 and ended the week down 12.19%; the Philadelphia Semiconductor Index fell 15.7% the same week. In a separate statement on 6 November, the Financial Supervisory Commission urged companies to buy back shares, cut the volume of shares that can be borrowed for short selling and raised margin requirements. The fund committee highlighted the Taiwan market's high correlation with the Philadelphia index, which shows the 500 billion NT dollar buffer is being deployed against an external shock rather than domestic demand.
Talay assessment
Bottom line
Taiwan's fragility lies not in its economic fundamentals but in a market structure concentrated in one sector and one company. TSMC's weighting above 40% and foreign holdings equal to 292% of reserves turn every headline about US data centre policy directly into pressure on the currency and reserves. The fund can damp volatility but cannot stop foreign outflows; the decisive factor is the path of the US semiconductor index.
Likely effects
- Taiwan dollar and reservesNegativeWeeks
If foreign selling persists, central bank intervention keeps reserves below 600 billion dollars; October already marked a second monthly decline.
- Equity marketUncertainWeeks
The 500 billion NT dollar fund and curbs on stock lending limit intraday collapses, but direction still hinges on the US semiconductor index.
- AI supply chainNegative1–6 months
Fears of US data centre curbs call into question order visibility for TSMC, at more than 40% of market value, and for server makers.
Possibilities, ranked
- 1A volatile floor held by the fund55%
The fund and the curbs slow the decline, the index trades erratically around 40,000 and foreign selling continues at a diminishing pace.
Watch: A marked fall in daily net selling by foreign investors
- 2The sell-off deepens30%
Concrete steps on US data centre regulation arrive, and foreign outflows and reserve losses accelerate.
Watch: A new weekly fall in the Philadelphia Semiconductor Index and November reserve data
- 3A swift rebound15%
US semiconductors rebound sharply, foreigners return and the mission ends without the fund actually being used.
Watch: Foreign investors turning net buyers on consecutive days
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Taiex▼ −4.51%
- FX reserves▼ $596.4bn
- October foreign net selling▼ NT$994.3bn