Still not time for stock market intervention: officials
Heads of finance said yesterday that the conditions in Taiwan’s stock market have still not met the terms for government intervention via the National Stabilization Fund ( ).
For weeks, the underperforming local bourse has generated speculation that the central government will activate the National Stabilization Fund, which is authorized to inject capital to the bourse in the interests of national stability.
Shares plunged to a two-year low yesterday, closing down 242.89 points, or 3.02 percent, at the day’s low of 7,786.92 on turnover of NT$101.64 billion.
Financial Supervisory Commission (FSC, ) Chairman William Tseng ( ) said yesterday the capital market still has not met conditions for government intervention.
Tseng said the National Stabilization Fund is only activated when financial market liquidity deteriorates, which is characterized by negligible trading activity.
“Today total trading volume of listed firms exceeded NT$110 billion, so to me it seems that the liquidity is still not at that point,” Tseng said.
Wu Tang-chieh ( ), vice finance minister and executive secretary of the National Stabilization Fund, also cited Friday’s volume as evidence of continued liquidity and said that market conditions don’t yet fit the criteria for emergency intervention.
The government is authorized to use the fund after major events and major international capital movements that batter investor confidence, Wu said, citing the Regulation on the Establishment and Management of the National Stabilization Fund (
). But a key criterion for activation is that the capital market has fallen into a state of disorder, and that’s
not yet the case, he said.
TAIEX Tumble Not Response to
On Friday, the TAIEX fell to its lowest point since June 2013, marking the beginning of its entry into bear market.
The FSC chairman said the fall was due partly to escalating tensions in the Koreas and mainly to a U.S. stock rout that shook investor confidence.
Tseng emphasized to reporters that it was not in response to the economic stimulus plan that the Cabinet released the day before.
On Thursday, the Executive Yuan announced five measures for short-term economic stimulus that mainly target Taiwan’s tourism and service industries.
According to the National Development Council, the measures could generate up to NT$8.85 billion in tourism profits this year and propel the growth of a sluggish domestic economy.
Finance Minister Chang Shengford ( ) said the fate of Taiwan shares is linked to the health of markets overseas.
“Taiwan stocks plunged today, but so did the stocks of the international economy — shares of the United States, Japan and China all fell by over 2 percent,” Chang said.
“From this you can see this is an international situation and that the recovery of the global economy has not been as stable as previously thought.”