Taiwan activates market stabilization fund amid global selloff in AI stocks

Taiex falls 12% this week, entering bear-market territory

Taiwanese authorities activated market-stabilization measures Friday, joining South Korea in moving to stem losses in local equities caused by the global selloff in artificial-intelligence-related stocks.

At an emergency meeting Friday afternoon, Taiwan’s National Financial Stabilization Fund authorized its executive secretary to deploy funds as needed to stabilize the market. Officials cited the sharp downturn in Taiwan’s stock market in the wake of the U.S. midterm elections, as well as continued selling by foreign investors, which they said indicated a significant lack of investors’ confidence.

“Market confidence is clearly insufficient in the short term,” officials said Friday, vowing to take the necessary measures to restore order.

The benchmark Taiex index shed 12% this week, tumbling alongside other tech-heavy indexes, as the Democrats’ victory in the U.S. midterm elections stoked concerns about tighter regulations that could slow the AI infrastructure buildout and hurt demand for AI-related hardware. The index is now down about 20% from its 2026 high, putting it in bear-market territory.

Taiwan occupies a critical role in the semiconductor supply chain as home to TSMC, the world’s largest contract chipmaker. The island reaped the windfall of the global AI investment boom: its stock market scaled record highs, exports surged, and the gains spilled over into broader economic growth.

The stabilization fund said Friday that Taiwan’s economic fundamentals remain sound but noted the market is dominated by high-tech stocks and closely correlated with the U.S. Philadelphia Semiconductor Index.

South Korea, Asia’s other chip-making powerhouse, has also been hit by the AI selloff. Earlier on Friday, authorities in Seoul stepped up efforts to steady the country’s stock market.

Taiwan’s Financial Supervisory Commission said it will tighten short-selling restrictions from Nov. 9 to combat volatility. The FSC also encouraged listed companies to consider share buybacks and hold investor briefings to replenish confidence.

Established in 2000, Taiwan’s stabilization fund is tasked with stepping in to quell market turbulence. It has a maximum of 500 billion Taiwan dollars in deployable capital, about US$15.11 billion.

During the Covid-19 pandemic, the fund’s presence in the stock market lifted the Taiex by more than 40%, according to the National Treasury Administration.