380 shares sink to 3.5% lower limit

After Premier Tang Fei (唐飛) resigned suddenly on Tuesday, Minister of Finance Shea Jia-dong (許嘉棟) announced immediately that the daily limit on stock prices will be narrowed from 7 percent to 3.5 percent on the down side, while the up side limit remained as 7 percent.

The measure will be imposed between Oct. 4 and Oct. 11, or a total of six trading days. The measure is aimed at heading off any panic selling by investors triggered by Tang's resignation.

After the market opened at 9am yesterday, the TAIEX immediately dropped nearly 200 points, or about 3.2 percent, with as many as 446 shares losing 3.5 percent at the opening.

Even after the Presidential Office announced that Vice Premier Chang Chung-hsiung (張俊雄) would be named as the new premier at around 9:30am, the TAIEX did not recover much until the final hour of trading.

The National Stabilization Fund (國安基金) was again used in a vain attempt to prop up the market, with some buying concentrated on banking and cement shares.

The TAIEX finally recovered about 50 points, closing at 5,997.92 points -- down 145.52 points from the previous day. As many as 380 shares fell the maximum lower limit of 3.5 percent. Turnover was NT$25.2 billion, the lowest level this year. Analysts said the TAIEX is likely to drop several hundred points within the next few trading days.

"To restrict the daily downside limit on share prices will simply encourage the market to fall further," said Henry Cheng (鄭百亨), managing director of Manulife Fund Direct.

"The thin volume demonstrates that most sell orders were not matched yesterday. Before the sell pressure is fully digested by the market, the TAIEX has little chance to rebound above 6,000 points. Before next Wednesday, the TAIEX is likely to test 5,500 points for near-term support."

When the market closed at noon yesterday, there were a total of 3.17 million sell orders and 1.35 million buy orders, leaving 1.8 million sell orders remaining.

"I am quite satisfied with the performance of the stabilization fund yesterday," said Yen Ching-chang (顏慶章), executive secretary of the National Stabilization Fund and vice minister of finance. Yen is possible candidate to take over as minister of finance minister.

Yen also asked investors to "sleep well tonight, because tomorrow the stock market would be another landscape."

"After the Cabinet reshuffle is ascertained, the market will be back to normal," Yen said. "Anyone who easily sells his holdings at this time will regret it later," Yen said.

Yen spent all morning yesterday at his office in the Ministery of Finance and closely watched the movement of the TAIEX.

"The TAIEX was down as much as 197 points. But it was only down 145 points at the close. The reaction of investors to Premier Tang's resignation and adjustments in the Cabinet is normal," Yen said late yesterday.

Yen also confirmed that the stabilization fund was used to intervene in the market.

"There was reasonable intervention by the stabilization fund," Yen said.

"As to the suggestion by some investors that the market be suspended for a few days, the Ministry of Finance has responded by narrowing the daily limit of share price movements in order to maintain the function of the market for listed companies acquiring funds through the market, therefore it is not necessary to suspend trading."