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Government funds seek bargains

The four government-run funds will go bargain-hunting in the stock market following its recent drop amid the global economic slowdown, Cabinet Spokesman Shieh Jhy-wey (謝志偉) said yesterday.

"Unfortunately, Taiwan was affected by the dramatic fluctuations in global stock markets. For sure, the four funds will enter the stock market. But the Executive Yuan will not meddle in the stock market mechanism," Shieh said.

The four government-run funds -- each worth more than NT$200 billion (US$6.17 billion) -- are the Civil Servant Pension Fund (退撫基金), the Labor Pension Fund (勞退基金), the Labor Insurance Fund (勞保基金) and the NT$3 trillion Postal Savings Fund (郵政儲金).

Shieh's remarks came after the TAIEX fell 6.51 percent on Tuesday amid a global stock market slump on fears of recession in the US.

The TAIEX closed down 173.56 points, or 2.29 percent, yesterday, at 7,408.40, despite a brief rally on the 75 basis point rate cut by the US Federal Reserve overnight.

"Domestic sentiment remains shaky," SinoPac Securities Corp (永豐金證券) analyst Jesse Knutson said in a client note yesterday. "Early gains were soon reversed as investors opted to cash out rather than chase prices, while margin calls aggravated declines among tech sub-sectors with LED [light emitting diode], networking and PCB [printed circuit board] hit the hardest."

Turnover was active yesterday, rising 20.32 percent to 161.864 billion from the previous day. Foreign investors bought a net NT$504 million in Taiwanese shares, while two domestic institutional investors -- investment trust firms and proprietary traders -- collectively sold a net NT$4.496 billion, the stock exchange tallies showed.

Both Chinese National Association of Industry and Commerce (工商協進會) chairman Theodore Huang (黃茂雄) and General Chamber of Commerce (全國商業總會) chairman Chang Ping-chao (張平沼) expressed concerns over the US recession and its likely impact on the local stock market.

Chang said there was no reason for the local benchmark to fall below the 7,000 point as most listed companies' earnings were healthy, with secured orders.

Huang urged businesses to be prudent and said that in the worst-case scenario, a recession could take "three to five years to bottom out."

Fears of a US recession and slower exports prompted Standard Chartered Bank on Tuesday to lower its previous economic projection for Taiwan from 3.8 percent to 2.7 percent to 2.8 percent. Citigroup last week dropped its forecast for Taiwan from 4.7 percent to 4.5 percent this year.

"It is understandable for people to panic after seeing the global markets tumble," Council for Economic Planning and Development vice chairman Thomas Yeh (葉明峰) said. "But evaluating the wellbeing of an economy through subjective judgments based on short-term sentiments is irrational."

Yeh said a contraction on external demand was expected and would happen after major exporting markets were hit by the US crisis, but that exports are not the only factor used to assess growth.

Yeh said he was not aware of a government plan to lower its economic growth forecast for this year.

“When we set the goal of 4.8 percent growth for the economy this year, we had already taken the influence of high oil prices and the aftermath of the US subprime crisis into account,” he said.

The government's Directorate General of Budget, Accounting and Statistics said the nation's economic growth would be 4.53 percent this year.
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