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Finance minister meets with officials over sell-off

Following yesterday's stock market plunge, Minister of Finance Yen Ching-chang (顏慶章) called an meeting with financial authorities to try to "understand" the cause of the stock sell-off.

By early evening Yen emerged from the meeting to reassure investors and "have confidence in the market," and that "several foreign firms" were involved in the sell-off, without identifying which ones.

The market fell to a new eight-year low, down 152.10 points, or 3.5 percent, to close at 4,219.89

The stock market opened yesterday on a wave of optimism from overnight gains in US stocks and signs from the government that it was serious about stemming the recent fall.

But, at roughly 10:30am the market saw a round of margin-related sales, which pushed the index lower to break the 4,300 psychological level. An estimated NT$600 million sell-off was triggered by three foreign brokage houses, Chinese-language media reports said, without further elaboration.

Thirty minutes after the sell off, officials at the Taiwan Stock Exchange Corp -- under the direct supervision of the Ministry of Finance -- reportedly stopped by the three unnamed foreign brokage houses to "express their concerns," opting to stay there for a couple of hours, the reports added.

Yen was said to have got wind of the margin trading activity going on between the spot market and the MSCI Taiwan futures contract that's traded in Singapore, adding that he knew a few foreign brokage houses were involved in the sell off.

Later reports alleged the three as UBS Warburg (華寶), Charles Schwab Corp (嘉信), and Salomon Smith Barney (所羅門美邦), but cited no sources for this information.

While the actions of the three firms did not break any laws, the moves are sure to draw scrutiny from the finance ministry.

Ding Ke-hwa (丁克華), deputy chairman of the Securities and Futures Commission, however, tried to downplay the check-up move yesterday, saying it's a normal procedure that the Taiwan Stock Exchange does on a regular basis in order to maintain market stability.

Meanwhile, one analyst said yesterday that the government was working overtime to push the market upward.

``The government has been doing everything it can to try and boost the market, talking about an economic recovery in the third-quarter, getting securities companies to lower their lending rates and saying that NT$100 billion has been allocated for stocks,'' said Simon Chao, an analyst at President Investment Corp.

Traders and investors also said yesterday money managers acting on behalf of the Government Employee Retirement & Benefit Fund bought shares in an effort to boost investor confidence.
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