The National Stabilization Fund is necessary to help maintain stability in domestic financial markets in times of turmoil caused by non-economic factors at home and abroad, Vice Premier Sean Chen (陳冲) told the legislature’s Finance Committee yesterday.
Chen, also chairman of the fund management panel, pledged to disclose final accounts and -shareholding details about the fund within one month, in accordance with the committee’s resolution.
“The fund has achieved its intended purpose of stabilizing the market since its creation in 2000,” Chen said. “It is better to keep the fund on hand just in case, like a fire extinguisher.”
The fund last intervened in the local bourse between Sept. 18 and Dec. 17 in 2008, buying NT$59.9 billion (US$1.95 billion) in shares amid the global financial crisis. It disposed of its holdings between Jan. 15 and Aug. 27 this year, after the market regained stability, with a return of more than 56 percent, or NT$33.7 billion, the Ministry of Finance said.
Not all interventions generated profits, however. The government intervened through the fund four times under the Democratic Progressive Party administration from 2000 to 2008 and incurred NT$46.69 billion in losses, said Chinese Nationalist Party (KMT) Legislator Alex Tsai (蔡正元), who presided over yesterday’s meeting.
Minister of Finance Lee Sush-der (李述德) echoed the need to keep the fund, saying the small and open local stock market is vulnerable to external shocks.
A mechanism is necessary to maintain calm and stability when non-economic factors shake investor confidence, Lee said.
The ongoing tensions between North and South Korea do not warrant an intervention, both Chen and Lee said.
Chen said the government has closely monitored the exchanges between the two Koreas and doesn’t think they warrant an emergency response.
The TAIEX closed up 0.77 percent, or 65.66 points, at 8,585.77 on heavy turnover of NT$171.2 billion yesterday, led by rallies in electronics and financial shares as well as positive cues from US markets overnight.
Chen expressed optimism about the nation’s economy, saying GDP is expected to grow at least 4 percent next year after expanding by double digits this year.
However, he was less upbeat about the global recovery and voiced concern that US quantitative easing may push up the local currency.
“The New Taiwan dollar did strengthen a bit in the last four months,” the vice premier said. “Theoretically, a rising NT dollar may offset [inflation] pressure.”
The NT dollar gained 0.2 percent to close at NT$30.788 against the US currency in Taipei trading yesterday, from NT$30.852 a day earlier. The local currency has picked up 3.88 percent against the greenback since the end of July.