Government officials yesterday urged stock investors not to overreact to the ongoing probe into the former first family over money-laundering allegations, which have wreaked havoc on the local bourse after the scandal came to light last week.
The TAIEX shed 22.14 points, or 0.3 percent, to close at 6,979.6 points, falling for the third day to its lowest point since Aug. 5. The benchmark index gained 33.73 points to reach 7326.07 last Thursday before former president Chen Shui-bian (陳水扁) offered an apology for wiring money abroad via dummy accounts.
Vice Premier Paul Chiu (邱正雄) attributed the slump to an overreaction on the part of investors that sent financial stock into a nosedive on allegations that mergers between banking institutions under Chen were tainted.
Chiu said he believed the jitters would soon subside, as the government went through a transfer of power in May and the Chinese Nationalist Party (KMT) would review flaws related to the financial reform and make amends, if necessary.
KMT Legislator Chiu Yi (邱毅) has accused Chen’s wife, Wu Shu-jen (吳淑珍), of taking bribes from Taishin Financial Holding Co (台新金控) in exchange for Changhwa Commercial Bank (彰化銀行) shares.
Taishin Financial won management control of Changhwa Bank after securing 1.4 billion preferred shares for NT$36.56 billion (US$1.16 billion), much higher than the floor price of NT$11.4 billion, in a government auction in 2005.
Paul Chiu said the government would take legal action if investigators uncovered any irregularities related to the financial reform.
The vice premier added the administration would press ahead with the effort to privatize state-owned shares in assorted banking institutions, in keeping with the principle of a free market.
Financial Supervisory Commission Chairman Gordon Chen (陳樹) also sought to boost the morale of stock investors.
Gordon Chen said the country’s financial fundamentals remained sound and his agency would take any steps necessary to free the market from unfair activities.
The commission would not rule out revoking mergers between banking institutions if the investigators detected major flaws in the procedures, Gordon Chen said.
The commissioner declined to elaborate on a potential remedy except to say it was unlikely the government would reclaim shares already sold to other banking institutions.
Taishin Financial, whose shares tumbled below its face value of NT$10, issued a statement to deny any wrongdoing.
The financial service provider said it bought Changhwa shares “in an open and fair fashion” and wrote off NT$100 billion in bad loans in the last three years.
Taishin Financial further dismissed allegations it offered the former first family NT$2.7 billion in return for management control of Changhwa Bank, saying the former state-run institution was debt-ridden before it released shares.
The government retains an 18 percent stake in Changhwa, while Taishin Financial controls 22.5 percent.
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