Tue, Mar 17, 2015 - Page 13 News List

Investors worried over Fed hike: Tseng

FUNDAMENTALLY SOUND:The FSC chief identified three critical factors for growth in the equity market: an improving economy, corporate profits and market liquidity

By Amy Su  /  Staff reporter

Prospects of an interest rate hike by the US Federal Reserve later this year pose the biggest uncertainty for Taiwan’s equity market, potentially dampening individual investors’ appetite for local stocks, Financial Supervisory Commission Chairman William Tseng (曾銘宗) said yesterday.

Tseng made the remarks during a question-and-answer session in the legislature, where he presented details about a slew of stimulus measures the commission unveiled last month to boost the local equity market.

“The fundamentals of the nation’s stock market remain solid,” Tseng told legislators.

He identified three positive factors for the development of the local equity market: an improving domestic economy, corporate earnings and sufficient market liquidity.

The nation’s GDP rose by more than 3 percent last year from 2013, and the Directorate-General of Budget, Accounting and Statistics forecast even stronger annual economic growth of 3.78 percent this year, an indication that the macroeconomic sentiment remains on track, Tseng said.

In addition, publicly traded companies — including the main bourse and over-the-counter markets — posted a total of NT$1.69 trillion (US$53.4 billion) in net income for the first three quarters of last year, an increase of 24 percent from the same period in 2013, evidence of their strong profitability, Tseng said.

However, rising expectations that the Fed would increase its policy rates later this year could put a damper on investors’ willingness to buy more Taiwanese stocks, amid concern over a net outflow of foreign portfolio investment, Tseng said.

Moreover, with the benchmark TAIEX surging past 9,600 points, investors might turn more cautious, Tseng said.

However, as of Friday last week, foreign portfolio investors had brought in a total of US$198.5 billion into the nation, with the government yet to see any abnormal signs of a net outflow, he said.

In response to lawmakers’ questions, Tseng said the commission might officially expand the daily stock trading limit from 7 percent to 10 percent, an important measure in its stimulus package, in late May or early June.

The commission will also encourage dozens of affiliated institutions under various government agencies to include relatively lower-risk exchange traded funds (ETFs) as their investment targets in May or June.

If all of these affiliated institutions start investing in ETFs by using 10 percent of their investment quota, the measure could help inject NT$20 billion into the local stock market by the end of this year, he said.

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