Taiwan needs to give cautious consideration to market stabilisation measures as they are a "double-edged sword", the head of its financial regulator said on Tuesday, pointing to the past "extreme" step of limiting short-selling.
Taiwan's benchmark stock index is down 24% so far this year, hit by concerns its export-dependent economy will be impacted by a slowdown in major markets China, the United States and Europe as well as tensions between Taipei and Beijing.
The head of Taiwan's stock stabilisation fund said on Monday they were paying close attention to market conditions and will take "effective" counter-measures.
Taking lawmaker questions in parliament, Financial Supervisory Commission chairman Thomas Huang described market stabilisation steps as a "double-edged sword": while they might help stock prices, they could affect liquidity and so caution was needed.
"Previously the most extreme step was limiting short-selling, or to raise the cost of short-selling," he said.
While reassuring investors, there also has to be liquidity in the market, Huang added.
Thus the timing of market support measures is a very important consideration, he said.
The market closed up 0.4% on Tuesday. (Reporting by Emily Chan; Writing by Ben Blanchard; Editing by Kenneth Maxwell)