Financial Supervisory Commission (FSC) Chairman Chen Yuh-chang (陳裕彰) yesterday urged investors to stay calm after the Taipei bourse took a dive to below 8,300 points at the end of the trading session.
Taiwan’s economic fundamentals remain sound and the one-day drop in the market is unlikely to have any adverse effects on the economic situation, Chen told lawmakers.
The TAIEX closed down 1.91 percent at 8,237.83 points, the lowest level since May 7, when it stood at 8,163.06 points.
Chen attributed the steep decline to negative external factors, referring to lingering concerns over the possible cessation of the US Federal Reserve’s stimulus measures.
Fed Chairman Ben Bernanke told US lawmakers on Wednesday that a premature withdrawal from the stimulus measures could hurt the US’ economic recovery, but Fed members said they were willing to scale down the bond-buying program as soon as next month if the economic recovery is sustainable.
Chen said the mixed messages from the Fed have raised fears that the US will scale back its quantitative easing measures earlier than expected.
It was understandable that the local bourse reacted negatively to such concerns, he told the Legislative Yuan’s Finance Committee, adding that investors should not worry about fluctuations in a single session.
Chen made the remarks in response to questions about the volatility of the local market.
The commission runs the Securities and Futures Bureau that monitors the stock market.
Democratic Progressive Party Legislator Hsu Tain-tsair (許添財) said he was worried about speculative buying in select small and mid-cap stocks on the over-the-counter market in recent sessions since these companies have reported losses for several consecutive quarters.
Chen said the GRETAI Securities Market already has a mechanism in place to monitor market fluctuations. Investors can still choose blue chip stocks with healthy fundamentals from the local bourse, he added.