The government’s decision yesterday to extend the use of the National Stabilization Fund for a third month to prop up local stocks may be effective in easing the weighted index’s downward slide, but it could also delay a market rebound, analysts said yesterday.
With the government manipulating the TAIEX, investors will continue to hesitate to pump money into the market, said an equity analyst, who requested anonymity.
Government intervention will only delay the market’s fall and prevent it from touching bottom, he said.
With foreign capital pulling out and global financial conditions deteriorating, the NT$500 billion (US$15.1 billion) fund’s management committee yesterday reached a consensus to extend the deadline, which was set to expire on Monday, for using the fund to support the index for another month ending on Dec. 17.
The committee first authorized use of the fund to support the stock market on Sept. 19 and extended it for another month on Oct. 15.
“Committee members share the same view and agree unanimously to authorize the use of the fund [to support the stock market] for another month because of domestic and global financial uncertainties,” Deputy Minister of Finance Tseng Ming-chung (曾銘宗) told a media briefing yesterday.
He refused to give more details, including how much the fund plans to use for stock investments.
The government’s announcement came after the local stock market closed yesterday. The TAIEX closed up 14.87 points, or 0.34 percent, at 4,452.7, with profit-taking eating away at earlier gains after a Wall Street rally overnight, dealers said.
Year to date, the benchmark index has fallen 47.66 percent.
The equity analyst estimated that the government fund spent about NT$5 billion and NT$8 billion daily to prop up the market — far higher than media speculation that it had invested a total of NT$80 billion since it started intervening in the market.
The biggest boost to the TAIEX would still be the return of foreign institutional investors, which account for about 30 percent of the market’s capitalization, the analyst said.
But that won’t be likely until global economies, particularly the US and Europe, begin to show signs of a recovery so that foreign investors could funnel more funds into Asia, including Taiwan, he said.
Taiwan International Securities (金鼎證券) analyst Arch Shih (施博元) said foreign institutional investors had been unloading electronic stocks, which have been battered by weakening demand worldwide.
Yesterday’s thin turnover of NT$51.2 billion also signaled that many investors remained sidelined amid fears of escalating tensions after former president Chen Shui-bian (陳水扁) was detained in a corruption probe.
“Non-economic factors are weighing on the market. The impact may continue as the investigation continues,” Shih said.
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