Government-run stock funds plan to sell off Taiwan bluechip company shares in the US to replenish their coffers, four securities analysts surveyed by the Taipei Times said yesterday.
A total of US$450 million worth of stock in Taiwan's two largest semiconductor makers will be sold as American Depository Receipts (ADRs) in the US in the near future. In separate applications to sell ADR shares filed with the Securities and Futures Commission (SFC), US$350 million in United Microelectronics Corp (聯電) shares and US$240 million in shares of Taiwan Semiconductor Manufacturing Co (台積電) are slated to be sold.
The market watchdog could not confirm or deny the shares were being sold by government funds. "The shares will be on behalf of the shareholders," according commission officials.
Late last night the SFC issued a statement saying that "we have approved the application by Taiwan Semiconductor Manufacturing Co to sell US$240 million in shares in the US."
But a group of analysts in Taiwan, all of whom requested anonymity for fear of government reprisal against their firms, believe the sale was initiated by government stock funds.
The government has bought shares to prop up the falling market this year and last -- nearly NT$200 billion by the National Stabilization Fund alone, according to the latest figures published by the Ministry of Finance.
Analysts say the government funds that once tried to prop up the market are weighing it down. With the market finally rising, it faces selling pressure at various levels as the funds try to unload their vast holdings.
The government's solution is to sell the excess shares into the US market, said one analyst.
The local bourse has dropped nearly 50 percent since the government began buying. Government-run banks and other sources began buying when the Taiwan Stock Exchange index dropped to around 8,000 points and the National Stabilization Fund stepped in when the index slid past 6,000 points. As of yesterday, the stock index sat at 4,123 points.
TSMC and UMC are two of only a handful of Taiwanese firms with ADRs listed on US markets. They also make up nearly a quarter of the entire value of the Taiwan Stock Exchange index.
As the market fell, government buyers bought billions of Taiwan dollars of stock from the two firms. Analysts say the only way the government can rid itself of that stock now without selling back into Taiwan's weak market is to sell the shares in the US.
The analysts said the ploy may send the market down anyway. Taiwanese investors tend to buy and sell local shares based on what their ADRs are doing on the US market -- if UMC's US-listed stock rises, its Taiwan stock also rises.
Once new shares of UMC and TSMC hit the US market, it will increase the available supply of shares. This could send the ADR prices down unless there is enough demand to soak up the excess supply. A fall in the ADR price would then lead to a fall in the local share price as investors in Taiwan flee the stock.
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