The Ministry of Finance's plan to activate its five government funds to prop up the stock market may end up wasting taxpayers' money and fail in its objective to boost the sagging bourse, a lawmaker warned yesterday.
"Government intervention will end up punishing real stock investors while protecting those who have no confidence in Taiwan's capital markets," PFP Legislator Thomas Lee (李桐豪) said.
Emphasizing the importance of the free-market mechanism, the lawmaker said the five funds -- including the NT$500 billion National Stabilization Fund -- should gradually abandon market intervention.
The other four funds are the Postal Savings Fund, the Labor Pension Fund, the Labor Insurance Fund and the Civil Service Pension Fund.
Lee said that last October the government racked up NT$217 billion in paper losses propping up the market with the five funds.
He said that, as of October, the stabilization fund, which has spent NT$151 billion, has lost some NT$56 billion of its value while four other funds bought NT$495 billion-worth of shares and lost some NT$161 billion on paper over the past two years.
Lee offered no updated loss figures yesterday, but said "stock intervention is a waste of taxpayers' money" -- a remark that one market analyst agreed with.
"Injection of government funds at times of high economic uncertainty is likely to result in more losses," said James Huang, (
Huang said that government funds, which aim to boost stock investor confidence, don't effectively support stock performance, especially when investors and companies remain conservative about the nation's future economic outlook.
He added that market fluctuations over the past two days were the result of falling confidence in the nation's chip industry.
Huang added that yesterday's stock movements appeared to show that the government funds intervened to ease a second-day drop of 98.21 points, or 2 percent, shortly before the TAIEX closed at 4,735.37. The market was down nearly 4 percent at its lowest point in the day.
Minister of Finance Lin Chuan (林全) yesterday denied the stabilization fund had acted since the market reopened on Thursday after being closed for the Lunar New Year holiday.
"The government hasn't made any moves to prop up the market after media exaggeration sent the bourse down for two days," Lin said at a press conference.
The minister urged investors to stay calm.
He voiced optimism, saying that "the more the TAIEX drops now, the more it is likely to bounce back in the future."
Lin reiterated that the National Stabilization Fund would only be activated in case of non-economic factors, such as the outbreak of war between the US and Iraq.
The minister, once head of the Directorate-General of Budget, Accounting and Statistics, shrug-ged off concerns that the funds were short on cash and refused to reveal how much the five funds have lost on paper, saying that he "dislikes figures."
"But it shouldn't be any problem for the government to activate the funds, if necessary," Lin said.
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