Cab­i­net rushes to lift TAIEX af­ter big­gest sin­gle-day drop on record

The China Post - - FRONT PAGE - BY ENRU LIN

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.

More Mea­sures

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.

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