Cabinet rushes to lift TAIEX after biggest single-day drop on record
The Cabinet scrambled yesterday to lift shares after TAIEX reeled at the open and shed nearly 7.5 percent, or 583.5 points, within 90 minutes of trading to mark its biggest single-day drop on record.
Around noon, the Executive Yuan authorized the government’s four major funds ( ) to buy up shares to prop up the benchmark.
William Tseng ( ), chairman of the Financial Supervisory Committee (FSC, ), said the government-managed funds purchased over NT$2.34 billion in shares.
In afternoon trading, the weighted index on the Taiwan Stock Exchange enjoyed a modest rebound from the day’s low of 7,203.07 to close at 7,410.34.
The local bourse should be stable on Tuesday unless U.S. shares end sharply down in the upcoming trading session, Tseng said.
In a statement released yesterday, the FSC outlined broad measures for stabilizing the market.
It will encourage publicly traded companies and the financial industry to hold shares in treasury — to buy back its shares to be sold later rather than canceled — to reduce price volatility, according to the statement.
The regulatory body also said it will encourage funds and the financial industry to bolster the market with the purchase of bluechip stocks.
In the statement, the FSC appealed to traders to make calm and objective decisions based on fundamentals.
The Taiwan Stock Exchange and the GreTai Securities Market post price-earnings ratios, pricebook ratios and yields each day for investors who wish to track the performance of each stock, the statement continued.
Regulatory measures that the FSC announced on Sunday should also help stabilize the market, the FSC chairman said yesterday.
The rules, including a ban on short sales of borrowed stocks below the previous day’s closing price, are technically sound and will have an effect “to a certain extent,” Tseng said.
Tseng said TAIEX’s nosedive on Monday had been driven by the deteriorating stock markets of China and Hong Kong, which ended down by 8.49 percent and 5.17 percent, respectively.
Without the double impact of the neighboring markets, TAIEX would have fallen by 150 to 200 points only, he said.
No Call Yet on Emergency Fund Late Monday, the National Financial Stabilization Fund Committee met to discuss whether to allow the state- managed emergency fund to support the index.
The committee has not announced a decision through the Executive Yuan spokesman as of press time.
The National Stabilization Fund ( ) is authorized to inject capital after major events that hurt investor confidence and causes the capital market to fall into disorder.
No Comment on Flux Cap
Tseng yesterday declined to comment on whether the FSC will rein in market liberalization measures that had been implemented earlier this year.
Reporters asked Tseng if the FSC would consider narrowing the stock fluctuation range to prevent further losses, or lowering the minimum margin maintenance ratio from 130 percent to 120 percent.
Tseng declined to comment, saying the FSC won’t conduct an evaluation on any one specific measure.
Earlier this year, the FSC had expanded the shares flux cap to 10 percent and the minimum margin maintenance ratio to 130 percent as part of efforts to standardize Taiex with global markets.
An investor watches a display of stock prices in Taipei, yesterday. Stocks tumbled across Asia yesterday, with the TAIEX opening sharply lower and shedding nearly 7.5 percent, or 583.5 points, in less than 90 minutes of trading.