The unwinding of leveraged bets in Taiwan’s stock market on Monday accelerated panic selling, helping spark the biggest tumble in the benchmark index’s 57 year history.

The level of margin debt dropped by NT$18.3 billion , the most since July 1999, according to exchange data compiled by Bloomberg. Just three weeks prior, debt levels had ballooned to the highest level since 2008 thanks to retail euphoria over the artificial intelligence (AI) boom.

The unravelling suggests traders faced margin calls by brokers to cover losses, adding to the pain during the record rout in the Taiwan Stock Exchange Weighted Index (Taiex). The benchmark’s biggest stock Taiwan Semiconductor Manufacturing Co also fell by a record level. 

“The sharp drop in Taiex will force liquidations from retail investors using leveraged trades, resulting in greater market volatility in the near term,” said Huang Wen-ching, vice president at Taishin Securities Investment Advisory. 

Asian markets broadly sold off on Monday on concerns over a looming US slowdown and worries about the viability and profitability of the AI trade. The selloff triggered a host of trading suspensions across the region with the MSCI Asia Pacific Index falling by the most since 2008.

  - Bloomberg