After the Dow Jones Industrial Average and the NASDAQ Index plummeted 3.64 percent and 2.96 percent respectively on Thursday, the local index fell in sympathy -- dropping 317 points below 5,500 at the market's opening yesterday.
But stocks staged a dramatic rebound between 11am and 11:50am to close at 5,876.11, up 71 for the day, on turnover of NT$75.6 billion.
Market watchers said the buying spree was mostly triggered by the National Stabilization Fund (
Rumors that the business sales tax paid by financial institutions would be lowered from 2 percent to zero also contributed to heavy buying in financial shares. The financial shares index rose 5.07 percent yesterday, the highest among the eight sector indexes.
Local media reported yesterday that the Executive Yuan may announce today a number of measures to revive the market, including lowering the business tax rate on financial institutions and a temporary suspension of the securities transaction tax. Nevertheless, Minister of Finance Yen Ching-chang (顏慶章) declined to confirm the report.
"The Ministry of Finance did not discuss the [tax cut] proposition," Yen said yesterday at the Legislative Yuan.
Finance ministry officials said it is unlikely that the ministry would propose any tax cuts.
After a heavy drop in the TAIEX at the market's open yesterday, investors were closely watching for any measures that might be proposed by the Executive Yuan today during the first economic and financial meeting to be led by President Chen Shui-bian (陳水扁).
Professional speculators have recently been coming out of the woodwork, spreading rumors about what possible measures the new administration may propose.
Finance ministry officials said the business sales tax on financial institutions has already been reduced from 5 percent to 2 percent. If there is any further adjustments on the tax rate, the tax law has to be amended first, the official said.
If such a move were taken, the time lag between legislation's introduction and implementation would be too long to quickly revive the market.
A proposal to suspend the securities transaction tax would also have to pass through the legislature. The official said that unless there was sufficient pressure from "above," the finance ministry would be unlikely to propose a tax cut.
According to local media reports, the finance ministry has proposed five measures for today's economic meeting, including encouraging merger activities in the financial sector and selling large tracts of state-owned land.
The Ministry of Economic Affairs is going to propose action plans for reviving direct investment to remove investment barriers.
"I am glad that investors have regained their confidence," Yen said after the market closed.
Yen again declined to comment on any activities or the actual amount of capital injected into the stock market by the stabilization fund in recent days. Yesterday was the last day that Yen was authorized by the fund's management committee to purchase local shares.
Yen said that the market's recent decline was mostly generated by tensions in the Middle East and rising international oil prices.
RSS