Taiwan Acts to Shore Up Stock Market : Investing: The country’s central bank takes steps to boost investor confidence after a key exchange index drops to a 20-month low.

The Central Bank of Taiwan has enacted measures to bolster investor confidence in the battered stock market after the Taiwan Stock Exchange index hit a 20-month low last weekend.

The bank said it approved a Securities and Exchange Commission proposal to increase upper lending limits for those who borrow funds or stocks to invest in the stock market.

The bank also said that it will permit four mutual fund companies to raise more funds from overseas investors who want to invest in Taiwan stocks.

In another move, the bank announced that it will allow Sumitomo Life Insurance of Japan to invest $30 million in the stock market. In recent weeks, the bank has approved a number of applications from foreign financial institutions that want to buy Taiwan stocks.

Foreign financial institutions are allowed to invest in Taiwan’s stock market under a liberalization program that began in late 1990.

Since the end of August, the bank has approved $240 million in investment by five foreign financial institutions.

The benchmark weighted price index of the Taiwan Stock Exchange lost 120.87 points or 3.48% Saturday to close at a 20-month low of 3351.63. The index is 38% below its 1992 peak, a Jan. 30 intra-day high of more than 5400.

Shares in companies linked to the Hualon group, one of Taiwan’s largest conglomerates, led the decline.

Hualon’s leader, James D. M. Oung, is expected to appear in Taipei District Court on Thursday for a hearing on Taiwan’s largest stock scandal. Oung was indicted for breach of trust and forgery in the case.