Financial policymakers yesterday disagreed over the need for tax cuts to stimulate the local bourse, which has consolidated around 9,600 points, bucking the rallies in Hong Kong and China.
Minister of Finance Chang Sheng-ford (張盛和) said the stock market is healthy and there is no need for stimulus measures, a view that central bank Governor Perng Fei-nan (彭淮南) supported.
However, Financial Supervisory Commission (FSC) Chairman William Tseng (曾銘宗) reiterated his dissatisfaction about trading volumes and cited the securities transaction tax as a possible cause.
The officials made known their views while fielding questions from lawmakers at a meeting of the legislature’s Finance Committee about the TAIEX’s underperformance, compared with ongoing rallies in China and Hong Kong.
“The stock market is healthy and therefore does not need medication,” Chang said.
Foreign institutional investors, which cut their net holdings by NT$21.6 billion on Wednesday, would increase their holdings if major technology firms gave rosy earnings projections, Chang said, adding that listed companies recorded a 3.6 percent increase in revenues last quarter.
“Earnings growth, ample liquidity and the absence of external shocks would lend support to the local market as time will prove,” he said.
Tseng agreed partially, saying the nation’s securities transaction tax of 0.3 percent is considered relatively high in the region, making the local bourse less competitive.
There is no transaction levy in Hong Kong, China, Japan or Singapore, while South Korea has a transaction tax of between 0.15 percent and 0.5 percent, he said.
Tseng said he expects daily stock turnover to fall between NT$120 billion and NT$130 billion (US$3.83 billion and US$4.15 billion) this year, but added that he is not satisfied with the forecast.
The daily trading volume used to reach NT$200 billion in the past, suggesting room for improvement despite the increase of investment tools over the years, Tseng said.
The commission has asked Academia Sinica to study the stock market momentum and submit an interim report in summer, Tseng said, adding that he would propose tax cuts if necessary.
Perng said research institutes tend to reach different observations and policymakers should not rely on any single study when making policy decisions.
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