Taiwan’s financial regulator said on April 23, 2026 that domestic equity funds and active ETFs will be allowed to raise exposure to a single listed company from 10% of net asset value to as much as 25%, subject to specific conditions. The revised rule applies only to stocks that account for more than 10% of the Taiwan Capitalization Weighted Stock Index, or TAIEX. Under the current market structure, TSMC is the only company that meets that threshold.
A rule built around index concentration
The change has been nicknamed the “TSMC clause” in the market, and the reason is straightforward. TSMC carries roughly 44.3% of the benchmark index and has a market value of about NT$55 trillion, far above the eligibility line. Other major index names, including Hon Hai and Delta Electronics, do not qualify under the same standard. For fund managers, the practical effect is clear: positions in TSMC can now rise from the old 10% ceiling to as high as 25%.
The cap is not being removed altogether. The regulator said total exposure, including the company’s corporate bonds or financial bonds, still cannot exceed 25% of a fund’s NAV, and it also cannot be higher than the stock’s actual weight in the broader market. That leaves more room for portfolio construction, but the risk guardrails stay in place.
Why the 10% ceiling became hard to maintain
The policy shift reflects how sharply Taiwan’s market has tilted toward one company. With AI-driven demand pushing the semiconductor industry higher, TSMC’s share of the local benchmark has climbed past 40%. Under the old 10% single-stock ceiling, active fund managers had limited ability to match the performance impact of such a dominant constituent. If TSMC rallied hard, active products could easily trail the index. That mismatch had become difficult to ignore.
According to the source material, the regulator also looked to an earlier precedent. In May 2025, Taiwan had already relaxed the single-component cap for passive ETFs to 30%. The latest move extends that logic to actively managed products.
Market estimates point to NT$200 billion in potential inflows
The amount of capital tied to the rule change is sizeable. As of the end of March 2026, Taiwan equity funds numbered about 138 with combined assets of roughly NT$1.0481 trillion. Active ETFs stood at around 14 products with assets of about NT$231.1 billion, while some industry estimates placed that figure above NT$300 billion. Based on official and market statistics cited in the report, institutional estimates suggest the change could unlock about NT$200 billion in potential buying power for TSMC.
Implementation will not be immediate. Fund houses still need to complete revisions to their fund contracts before they can apply the new 25% limit. The adjustment also means portfolio concentration will rise, making fund NAVs more sensitive to moves in TSMC shares.