Government backs analysts on indictment impact

By Jackie Lin  /  STAFF REPORTER

Mon, Nov 06, 2006 - Page 12

Bolstered by stable economic fundamentals, the stock market is unlikely to experience drastic fluctuations as a result of the indictment of the first lady Wu Shu-jen (吳淑珍), Hu Sheng-cheng (胡勝正), chairman of the Council for Economic Planning and Development (CEPD) said yesterday.

News of the indictment had spread before the stock market closed on Friday, but the benchmark TAIEX still advanced by 83 points to close at 7161.61, emphasizing the point that investors were unaffected, he said.

Hu made the comment after an ad hoc Cabinet meeting convened by Premier Su Tseng-chang (蘇貞昌) yesterday morning, where heads of the Ministry of Finance, the Ministry of Economic Affairs and the central bank attended to brief the premier on the nation's financial and economic situation.

Hu said the public had reacted rather peacefully over the weekend, which shows Taiwan has developed into a mature democratic nation.

The indictment might have affected the public psychologically, but investors would remain rational when trading stocks, he said.

Hu added that the premier did not give instructions to activate the National Stabilization Fund (國安基金) to stabilize the stock market.

Deputy Minister of Finance Liu Teng-cheng (劉燈城), who doubles as the executive secretary of the stabilization fund, told reporters yesterday that the steering committee would keep a close eye on the market but has no plans yet to convene a meeting to decide whether the stabilization fund should be used to bolster prices.

"We'll take another look at the market situation on Monday. If it complies with the prerequisites, [such as when non-economic elements disrupt the financial market], we'll call a committee meeting," he said.

CEPD's Hu, who also serves as the chief of the Cabinet Development Fund (開發基金), said the fund could be activated to buy shares when necessary. But from a long-term point of view, he saw no imperative for the moment to use the fund.

The central bank also reiterated its stance to maintain order in the foreign exchange market, according to a statement issued after the Cabinet's meeting.

"The New Taiwan dollar's exchange rate will be decided by the market's supply and demand. However, if the exchange rate fluctuates excessively due to incidental factors, the central bank will intervene," the bank said.

Taiwan's foreign-exchange reserves stood at US$261.8 billion at the end of last month.