The government yesterday announced that the state-run National Stabilization Fund (國安基金) was prepared to intervene in the stock market to support share prices amid recent market volatility, Vice Minister of Finance William Tseng (曾銘宗) said.
It would be the first time the fund has intervened in the TAIEX since September 2008. The fund intervened in the market between Sep. 18 and Dec. 17 of that year because of the global financial crisis.
“The recent market tumble and shrinking turnover were the main reasons that the fund’s management committee authorized intervention to stabilize the stock market,” Tseng, who is the executive secretary of the fund, told reporters.
The death of North Korean leader Kim Jong-il and tenacious uncertainties in the global economy were also key factors they have closely watched, Tseng said.
Vice Premier Sean Chen (陳冲) said the steering committee decided to invoke Article 8 of the Regulation on the Establishment and Management of the National Stabilization Fund (國家金融安定基金設置及管理條例) to authorize intervention.
The article stipulates that the funds may be utilized to stabilize the stock market in the event of significant occurrences at home or abroad or large-scale movements of international capital that have a substantial impact on public confidence and raise concerns about loss of order in capital markets or other financial markets, or impairment of national stability.
According to past experience, the maximum amount of the fund that can be used to intervene the stock market is NT$500 billion (NT$16.47 billion).
The TAIEX has shed 25.74 percent so far this year, falling 22.92 percent since the end of July, with the average daily turnover this month dropping to NT$68.07 billion, the lowest level this year, according to data from the Taiwan Stock Exchange (TWSE, 台灣證交所).
However, combined revenue posted by domestic listed companies totaled NT$1.68 trillion last month, up NT$29.1 billion, or 1.76 percent, from a year earlier, indicating that the stock market’s fundamentals remain healthy, TWSE said in a statement yesterday.
Additional reporting by Shih Hsiu-chuan