The Financial Supervisory Commission introduces the "TSMC Clause"!
The single-stock holding limit for Taiwan stock funds is relaxed to 25%,
with up to 200 billion in fresh capital expected to flow in.

Taiwan stocks welcome a super liquidity of over 200 billion yuan! The Financial Supervisory Commission officially announced yesterday (23rd) that the limit on single holdings in Taiwan stock funds and active ETFs will be relaxed from the current 10%, with a conditional increase to 25%. Because the threshold requires that the stock must account for more than 10% of Taiwan’s stock market weight, currently only “National Champion” TSMC meets this standard. This new regulation, dubbed the “TSMC Clause” by the industry, is expected not only to significantly loosen fund managers’ trading constraints but also to potentially drive TSMC’s stock price to a new wave of re-evaluation (Re-rating).
(Background summary: TSMC surged to a new high of 2,135 yuan in early trading, Taiwan stocks rose over 900 points but then reversed and fell below 38,000 points)
(Additional background: Taiwan stocks surged past 37,000 points, with market value surpassing the UK, becoming the seventh-largest stock market in the world)

Table of Contents

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• The tailored “TSMC Clause”
• Why relax? Unraveling fund managers’ “tight grip”
• Potential capital inflow of up to 200 billion yuan

The regulatory framework of Taiwan’s capital market is undergoing a historic transformation due to the enormous market value of tech giants.

The FSC announced a major policy relaxation on April 23, 2026: the limit on investment in “single listed company stocks” in Taiwan equity funds (Taiwan stock funds) and active ETFs will be raised from the original 10% of the fund’s net asset value (NAV) to a conditional maximum of 25%.

The tailored “TSMC Clause”

This relaxation does not mean all stocks will benefit equally, as it sets a very high threshold. The new regulation specifies that it applies only to stocks that account for more than 10% of the Taiwan Stock Exchange Weighted Index (TAIEX).

Looking at the current Taiwan stock market, large-cap stocks like Hon Hai and Delta Electronics do not meet this standard, only TSMC (2330) with an astonishing 44.3% weight (market cap about 55 trillion NT dollars) qualifies. Therefore, this regulatory relaxation is essentially a “TSMC Clause” tailored specifically for the national champion.

According to the new rules, if fund managers are optimistic about TSMC’s future prospects, they can increase their holdings from the current 10% cap up to a maximum of 25%. However, the FSC also set risk controls: the total investment (including bonds or financial bonds of the company) must not exceed 25% of the fund’s net value, and must not surpass TSMC’s actual weight in Taiwan stocks.

Why relax? Unraveling fund managers’ “tight grip”

In recent years, Taiwan’s semiconductor industry has expanded rapidly amid the global AI wave, with TSMC’s weight in Taiwan stocks rising to over 40%. However, constrained by the old “10% single stock limit,” active funds and active ETFs have been “handcuffed.”

When a stock in the major index accounts for as much as 44%, but the fund can only buy 10%, a significant rise in TSMC’s stock price can easily cause active fund performance to “underperform the market,” severely limiting operational flexibility and weakening the international competitiveness of fund companies. To address this, the FSC drew on the successful experience of relaxing the “30% cap on single components in passive ETFs” in May 2025, and decided to further loosen restrictions on active products.

Potential capital inflow of up to 200 billion NT dollars

This policy relaxation will bring substantial capital momentum to Taiwan stocks. According to official and market statistics:

• Taiwan stock funds: As of the end of March 2026, there are about 138 funds with assets totaling approximately 1.481 trillion NT dollars.
• Active ETFs: About 14 funds, with assets around 231.1 billion NT dollars (some industry estimates suggest over 300 billion NT dollars).

Institutional investors are optimistic that, as the holding limit ceiling is lifted, about 200 billion NT dollars of potential new capital will flow into TSMC. This will not only help fund managers “rebalance” their holdings but also promote a re-evaluation (Re-rating) of TSMC’s stock price, indirectly becoming a powerful engine to support Taiwan’s stock market rally.

However, the industry also reminds investors that this positive effect will take time to materialize. Fund providers must first legally complete the “fund contract” amendments before the new 25% limit can be applied in practice; at the same time, a significant increase in concentration means that the NAV and TSMC’s stock price will become more closely linked, so investors should carefully assess concentration risks before subscribing.