Rescue capital for stocks to be raised

A total of NT$210 billion is expected to be added to the four government funds that are used for investment in the local stock market before the end of this month.

In a briefing with PFP legislators yesterday, the four government funds' managers said the total amount of capital that is currently available for investment in the stock market is only NT$50 billion, down from NT$381 billion.

PFP legislators invited fund managers from the four government funds yesterday to discuss the current status of their operations.

The new administration has decided to add another NT$210 billion into the pool, the fund managers said. This includes NT$150 billion from the Postal Savings Fund (郵儲基金) granted by Premier Tang Fei (唐飛) earlier this week, and NT$20 billion from the Labor Pension Fund (勞退基金), which is expected to be approved later this week after the fund's ceiling in equities is raised from 30 percent to 40 percent.

Another NT$46.7 billion would come from the Labor Insurance Fund (勞保基金) -- 10 percent of the fund's assets.

The Labor Pension Fund's investment committee will review the proposal on Sept. 28. The preliminary aim for the additional capital is to help boost the shares of companies in low-priced traditional industries, the fund managers said.

"The recent decline in the stock market is being caused by a lack of confidence," said Huang Rong-shean (黃榮顯), director general of Central Trust of China (中央信託局) and chief manager of Civil Servant Fund. "The principle of the four funds is to buy low and sell high. The average daily volume that the four funds involved in the local stock market has been under NT$10 billion.

"The four funds are used to `ignite' the market -- but such moves have only a limited effect. If the market remains depressed, the government funds would operate according to their original model.

"It's my hope that the government funds could have a total of NT$600 billion available for use in the stock market," Huang said. "Then the funds could establish a mechanism for emergency buying. With only NT$10 billion at present, there is not much that the government funds can do now."

Huang reported how the funds have been used recently.

"The government placed about 50 percent to 60 percent in electronics shares, 10 percent in financial shares and the remaining 30 percent in shares of companies in traditional industries," Huang said.

The government funds' return on investment as of the end of June was as follows: 20.39 percent profit for the Labor Insurance Fund, 26.26 percent profit for Labor Pension Fund, 9.55 percent profit for the Postal Savings Fund, and 33.71 percent profit for Civil Servant Pension Fund. These figures, however, do not include third-quarter losses.

An unofficial report said that government funds have lost about NT$20 billion after attempting to support the stock market since the new administration came into office.

"The four government funds are depleting their ammunition fast," said Lee Ching-an (李慶安), a PFP legislator. "The ceiling for the Labor Insurance Fund's stock investments is NT$91 billion, and NT$90 billion has already been used up.

The Labor Pension Fund has only NT$5 billion. The Postal Savings Fund, which originally had NT$150 billion, only has NT$35 billion remaining. The NT$78 billion Civil Servant Pension Fund (退撫基金) has used NT$70 billion, and has less than NT$8 billion left."