While some stock traders may think they've lost a lot in the market, taking a look at the paper losses of the government may prod them to consider themselves lucky.
The National Stabilization Fund has lost NT$49 billion by the end of last month and is likely to lose more than NT$50 billion as the stock market declines further.
According to an official report from the management committee at the fund, total book losses on NT$170 billion in investment reached NT$49 billion at the end the second quarter. The stabilization fund has so far lost about 30 percent of its investment.
Needless to say, current share prices aren't going to trigger a government sell-off anytime soon.
"Since the timing is not propitious, the fund would currently not consider unloading its shares," Lin Tzong-yeong (林宗勇), vice minister of finance, said at a the fund's committee meeting on Wednesday.
Following the drop in the stock market below 4,600 points on Wednesday, Lin was questioned on whether the stabilization fund would intervene in the market.
"I cannot answer the question, since it's a decision left for the management committee [of the stabilization fund]," Lin said.
Any transactions made by the stabilization fund are kept confidential until the shares are unloaded, according to the regulations governing the fund.
Recent declines in the stock market have increased the already high losses to the fund.
According to a report disclosed by the stabilization fund, the fund had lost a total of NT$41.7 billion at the end of 2000. Losses to the fund amounted to NT$6.8 billion in the first six months of 2001, on total shareholdings of NT$170 billion accumulated from last year.
The majority of the fund's shareholdings have not been sold, except its holding in Grand Cathay Securities.
According to Lin, the stabilization fund sold six million to seven million shares of Grand Cathay last month, earning a profit of NT$40 million.
China Development Industrial Bank (
The fight drove Grand Cathay's share price sky high. Although the stabilization fund has clearly stated that it's not going to release any shares at this time, the price movement of Grand Cathay led the fund's management to make an exception.
As to the future disposition of the fund's shareholdings, the management committee confirmed in the meeting that five mechanisms for disposing of shares would be utilized when the time is appropriate.
The five methods include the block trading of shares, overseas depository receipts (such as global depository receipts and American depository receipts), issuing overseas convertible bonds and warrants, a Hong Kong-style, government-administered mutual fund and through discretionary management accounts.
"The management committee did not discuss whether to dispose of the fund's shares [in Wednesday's meeting]," Lin said. "However, the committee had decided in the [first quarter] meeting that its shareholdings would not be disposed of for the time being."
The Securities and Futures Commission on Wednesday approved the fund's application to convert shares of United Microelectronics Corp (
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