The Ministry of Finance yesterday denied a report in a Chinese-language newspaper that the ministry plans to sell all the shares it bought using the NT$500 billion National Stabilization Fund (國安基金) by the end of the year.
"With the strict restrictions on selling set by the fund's steering committee, it is highly unlikely that all the fund's shares will be sold by the end of the year," Vice Minister of Finance Gordon Chen (陳樹) said at an emergency press conference yesterday evening.
The shares bought by the fund had a market value of NT$101.8 billion on June 30.
The front-page report in the Commercial Times that the National Stabilization Fund was selling its stock market assets contributed to a fall in the benchmark TAIEX of 128.6 points to 5,558.25.
"The sale of government-owned shares will be done on the condition that the TAIEX will not be destabilized," said Chen, who is also the steering committee's executive secretary.
The steering committee has commissioned two institutional investors to release the government's shares under a condition that the selling prices must exceed stock prices on the previous day, according to Chen. During the last six months, the fund has sold shares worth NT$20 billion in total.
"On average, total sales of the fund's stock market assets may not exceed 0.5 percent of the TAIEX's daily turnover, which poses no threat to the TAIEX," Chen said.
In other words, the government can only sell shares with rising prices, and in a limited quantity, so that the TAIEX will not be destabilized, he added.
"Therefore, the government has no way of knowing when shares will be sold, since sales are based on the market's price fluctuation, which is unpredictable," he said.
The committee recently allowed shares for which the market prices had dropped below 80 percent of buying prices to be released in the form of an exchange traded fund, which represents a basket of stocks. The exchange traded fund is a security that tracks an index, but has the flexibility of trading like a stock.
The fund was created in 1998 to bolster investor confidence during a period of increased tension with China, Chen said.
Forming such a fund would allow Taiwan's government to convert some of the shares in its Stabilization Fund bought to bolster stock prices in past years.
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