Vice Minister of Finance Wu Tang-chieh (吳當傑) yesterday said that the National Financial Stabilization Fund would not unload its holdings for the moment as the local equity market continues to move in consolidation mode.
Wu, the executive secretary of the committee which supervises the fund, said that the fund would not cut its holdings until equity market conditions improve and the market gets out of its current rut.
The NT$500 billion (US$15.45 billion) stabilization fund is a mechanism set up by the government to serve as a buffer against unexpected external factors that disrupt the bourse.
The fund, which has been in existence since February 2000, intervenes in the market when it receives authorization from the fund committee.
On April 12, the fund committee announced a pullout from the equity market after it had stepped into the market to support local share prices on Aug. 25 last year, when global financial markets suffered volatility due to a plunge in the value of the yuan.
The fund remained active through April 12 as the committee feared that the equity market would be interrupted by possible non-economic factors caused by the Jan. 16 presidential election.
The continued presence of the fund up to April 12 represented the longest intervention since the fund started operations in 2000. During its intervention, the weighted index on the Taiwan Stock Exchange rose 15.13 percent, making it the second-best performing market in the world, trailing only the Philadelphia Semiconductor Index.
After the announcement of the fund’s exit from the market, share prices fell into consolidation mode, partly amid fears that the fund would start to cut its holdings, analysts said.
Wu said that the fund committee has no fixed timetable to sell stocks it bought during the latest intervention, and more importantly, any decision by the committee to cut its holdings would not affect market movement. Therefore, with market stabilization the main priority, the committee is not prepared to unload any stocks at this time.
Wu said that there have been various factors affecting the equity market, such as external equity performance and economic fundamentals. He added that he believed the equity market would improve once the economy recovers from last year’s downturn.
Since Aug. 25 last year, the fund had purchased NT$18.7 billion of stocks and posted NT$96.28 million in realized gains and NT$1.48 billion in unrealized gains, the committee said.
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