The nation's main stock index plummeted 4.84 percent yesterday on heavy NASDAQ losses in the US on Friday and worries that Taiwan will suffer a banking crisis early next year.
The TAIEX dropped 295.22 points, closing at 5,793.52 points. Turnover fell to NT$60.3 billion, far less than the NT$100 billion average turnover last week.
Adding to the already poor sentiment, The Economist recently predicted that Taiwan could face a financial crisis by early next year.
The article in the latest issue of the magazine suggests that a financial crisis could occur before the Lunar New Year.
The report had a strong affect on investor confidence yesterday, even though Minister of Finance Yen Ching-chang (
The TAIEX was hit by selling pressure at the open yesterday, as shares immediately fell 360 points.
The National Stabilization Fund (
Domestic politics also undermined investor confidence after the leaders of the three opposition parties met Saturday and declared that their effort to recall President Chen Shui-bian (
"There is no danger of a financial crisis in Taiwan. If there is any problem, just leave it to the finance minister," Yen said while facing lawmakers in the Legislative Yuan yesterday.
Yen made the comments after a legislator quoted a Moody's report in August that stated: "Foreign executives have rated Taiwan's private financial institutions as a D+ and state-owned financial institutions as a D, which is the worst among Asian countries, and even worse than Panama."
Yen said that the loan extension situation is not as bad as outsiders think.
"According to the Bureau of Financial Affairs, the total amount of loan extensions stand at NT$344.7 billion.
"All companies granted loan extensions have sound operations," Yen said.
"As to the average overdue loan ratio of the domestic banking industry [not including credit cooperatives], it stands at about 5.36 percent, or a total of NT$779.4 billion.
"Among them, 65 percent are backed up by collateral, and most of the loans could be paid back [after the collateral is sold through auction or asset management companies]. Therefore, these overdue loans are not actually bad loans," Yen said
Foreign executives do not overwhelmingly take a negative view regarding Taiwan's current financial problems, Yen said.
"But local media and legislators have been emphasizing the negative aspects of these financial irregularities."
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