FSC introduces "TSMC Rule"! Single stock holding limit for Taiwan equity funds relaxed to 25%, expected to inject NT$200 billion in liquidity

Taiwan stocks are set to receive a massive liquidity injection of NT$200 billion! The Financial Supervisory Commission (FSC) officially announced yesterday (23rd) that it will relax the 10% single-stock holding limit for Taiwan equity funds and active ETFs, conditionally raising it to 25%. Given the threshold requiring the stock to account for over 10% of the Taiwan stock market weight, TSMC is currently the only company in the entire market to qualify. This new regulation, jokingly dubbed the "TSMC Clause" by the industry, is expected to not only significantly liberate fund managers' trading flexibility but also potentially drive a new wave of re-rating for TSMC's stock price. (Previous coverage: TSMC hit a record high of NT$2,135 in early trading; Taiwan stocks reversed downward after rising over 900 points, failing to hold the 38,000-point mark) (Background: Taiwan stocks surged to 37,000 points, with market capitalization surpassing the UK to become the world's seventh-largest stock market) Taiwan's capital market regulatory framework is undergoing a historic transformation due to the massive market capitalization of tech giants. On April 23, 2026, the FSC announced a major policy relaxation: the limit for Taiwan equity funds and active ETFs to invest in "single listed company stocks" will be conditionally increased from the original 10% of the fund's Net Asset Value (NAV) to 25%. This relaxation does not apply to all stocks equally but sets a very high threshold. The new regulation specifies that it only applies to individual stocks that account for more than 10% of the TAIEX (Taiwan Stock Exchange Capitalization Weighted Stock Index). Looking at the current Taiwan stock market, large-cap stocks such as Hon Hai and Delta Electronics do not meet this standard. Only TSMC (2330) qualifies, with an astonishing weight of approximately 44.3% (a market cap of about NT$55 trillion). Therefore, this regulatory relaxation is essentially a "TSMC Clause" tailored for the "Guardian Mountain of the Nation." According to the new rules, if fund managers are bullish on TSMC's outlook, they can increase their holdings from the original 10% ceiling to a maximum of 25%. However, the FSC has also set risk guardrails: the total investment (including the company's corporate bonds or financial bonds) must still not exceed 25% of the fund's NAV, and it must not exceed TSMC's actual weight in the Taiwan stock market. In recent years, Taiwan's semiconductor industry has expanded rapidly under the global AI wave, with TSMC's weight in the Taiwan stock market climbing to over 40%. However, restricted by the old "10% single-stock holding limit," managers of active funds and active ETFs have been "handcuffed." When a single stock accounts for 44% of the index, but a fund can only hold a maximum of 10%, active funds easily "underperform the market" whenever TSMC surges, severely compressing operational flexibility and weakening the international competitiveness of the investment trust industry. To this end, the FSC referenced the successful experience of relaxing the "30% single-component limit for passive ETFs" in May 2025 and decided to further loosen the constraints on active products. This policy relaxation will bring significant capital momentum to Taiwan stocks. According to official and market statistics: - Taiwan equity funds: As of the end of March 2026, there are approximately 138 funds with an asset scale of about NT$1.0481 trillion. - Active ETFs: There are approximately 14 ETFs with an asset scale of about NT$231.1 billion (some industry estimates suggest it has already reached over NT$300 billion). Institutional investors optimistically estimate that as the holding ceiling is lifted, it could release approximately NT$200 billion in potential liquidity into TSMC. This will not only help investment trusts with "stock replenishment" operations but will also drive a re-rating of TSMC's stock price, indirectly serving as a powerful engine to support the continued upward momentum of the Taiwan stock market. However, BlockTempo reminds investors that this positive development will take time to materialize. Investment trust firms must first complete the legal procedures for amending "fund contracts" before they can actually apply the new 25% limit. At the same time, a significant increase in holding concentration means that the correlation between fund NAV and TSMC's stock price will become much tighter; investors should carefully evaluate concentration risks before subscribing.