Mon, Oct 17, 2016 - Page 16 News List

Stabilization fund profits NT$1.2bn from equity sales

Staff writer, with CNA

The National Financial Stabilization Fund made a profit of about NT$1.2 billion (US$37.89 million) after disposing of shares it bought in the local equity market during its intervention from August last year to April, according to statistics released by the Ministry of Finance.

During the period of the intervention, the fund spent NT$19.658 billion buying shares, in a bid to counteract negative impacts on the equity market, the data showed.

By Sept. 21, the stabilization fund had sold the shares it bought in 29 large-cap stocks from Aug. 25 last year to April 12. The net profit of NT$1.21 billion represented a 6.16 percent return on its investment.

The NT$500 billion stabilization fund was set up by the government to serve as a buffer against unexpected external factors disrupting the local bourse.

The fund, which was created in February 2000, intervenes in the market when it receives authorization from the fund’s committee, which is now managed by Deputy Minister of Finance Su Jain-rong (蘇建榮).

Following the sharp depreciation of the yuan against the US dollar in August last year, the committee authorized it to intervene in a bid to curtail irrational selling on the local equity market.

The fund continued its presence after the presidential election was held on Jan. 16.

The intervention after the vote was aimed at preventing noneconomic factors from affecting equity prices and bolstering investor confidence. The fund pulled out of the market in mid-April.

The National Treasury Administration confirmed that the stabilization fund provided tremendous support to the local equity market during the intervention period.

During that period, the TAIEX rose 856 points, or 11.15 percent, to close at 8,531 points on April 12.

The 29 stocks bought by the stabilization fund during the intervention included contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), Formosa Chemicals & Fibre Corp (台灣化學纖維), Formosa Plastics Corp (台灣塑膠), food maker Uni-President Enterprises Corp (統一企業) and Fubon Financial Holding Co (富邦金控), the administration said.

Statistics show that the fund made NT$540 million in net profit by selling shares in TSMC, which is the most heavily weighted stock in Taiwan.

The gains posted by investing in TSMC accounted for about 40 percent of total profit made during the intervention.

The administration said that the stabilization fund disposed of the shares in an orderly manner so the sales had no impact on the equity market.

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