Cabinet moves won't help in short term: economist

The four measures the Cabinet announced late on Thursday night to boost the stock market will not immediately have an impact, but such moves could benefit the bourse in the long term, an economist said yesterday.

"The public expects an immediate effect from the government's policies, but it's healthier to implement measures that can gradually improve the structural problems of the stock market," Ko Chen-en (柯承恩), president of the Chung-hua Institution for Economic Research (CIER, 中經院), told reporters at a press conference yesterday.

The stock market, already under pressure from domestic political turmoil, was struck by a bird flu scare this week.

The benchmark TAIEX fell 230.31 points, or 3.86 percent, this week. The index declined 1.85 percent last week.

The Cabinet held an emergency meeting on Thursday evening, and released a four-point measure for shoring up investor confidence.

These measures include loosening share buyback rules for banks by lowering the required capital adequacy ratio from 150 percent to 120 percent, raising the overseas investment ceiling for insurers if they invest more in the local bourse, lifting limits on bank loans to the flat-panel display industry in a bid to encourage consolidation and lowering taxes on gifts and inheritance.

These measures, however, will only be implemented after related laws and regulations are amended, according to the Cabinet.

While the Cabinet's new measures could help prevent stocks from declining further, prospects for the next several months remained unclear, particularly given the Dec. 3 local government elections.

A Morgan Stanley report released yesterday and titled Rebound Likely, but not Recovery said, "Better third-quarter results and fourth-quarter guidance, particularly in the tech and chemical sectors, could drive a market rebound as valuations look cheap and investors appear to have discounted much of the bad news [concerns over high oil prices, tech demand, slower financial reform, and, oddly, bird flu]."

Morgan said the TAIEX could rebound by approximately 8-10 percent by the end of the year.