Government quiet on share sales

IN THE DARK::Despite a projected total budget shortfall of $273 billion next year, the government remained tight-lipped about selling the state’s bank and bluechip shares

By Kevin Chen  /  Staff reporter

Tue, Aug 13, 2013 - Page 13

The Cabinet yesterday approved next year’s proposed annual budget, but shed little light on plans to sell its stakes in some state-run banks and several bluechip companies next year to help plug its budget shortfall.

Following a meeting to discuss next year’s central government budget plan, the Cabinet said the government has projected annual spending of NT$1.9407 trillion (US$64.7 billion) with income forecast at NT$1.7308 trillion, leaving a budget deficit of NT$209.9 billion.

Together with NT$64 billion in debt repayment, the government will face a total budget shortfall of NT$273.9 billion next year.

“All of the shortfall will be covered by issuing government bonds and rely on borrowing,” the Cabinet said in a statement.

The statement fell short of market expectations of a government plan to sell shares in state banks and bluechip companies next year, including Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), as local media had reported.

Faced with a sluggish economy, the government is finding it increasingly difficult to raise taxes or borrow to finance its deficits, looking instead to sell shares in state-owned enterprises or privatize public utilities to increase its income.

The Chinese-language Economic Daily News and the Commercial Times, citing unnamed government sources, yesterday reported the government was planning to offload between NT$50 billion and NT$80 billion of its shares in TSMC, China Steel Corp (中鋼), Chunghwa Telecom Co (中華電信), Taiwan Cooperative Financial Holding Co (合作金控) and Mega Financial Holding Co (兆豐金控), among others.

The reports said the Cabinet had directed the nation’s four major funds — the Labor Insurance Fund, the Labor Pension Fund, the Public Service Pension Fund and the Postal Savings Fund — to purchase the government’s shares to avoid market fluctuations while maintaining the government’s control of those companies.

Cabinet spokesperson Cheng Li-wun (鄭麗文) said the Cabinet did not discuss share sale plans during the weekly meeting.

Cheng said she could not confirm if other government agencies — the Ministry of Finance, the Ministry of Economic Affairs, the Ministry of Transportation and Communications, or the National Development Fund (國發基金) — are considering selling shares to help boost the state’s coffers.

“The share sale plans, if there are any, will need to be submitted to the Executive Yuan for review,” Cheng said by telephone.

For his part, Minister of Finance Chang Sheng-ford (張盛和) yesterday confirmed the ministry’s share sale plan.

However, Chang said the number of shares the ministry is going to sell in some state-run banks remained unknown.

“It will have to wait for the Cabinet’s discussion next week,” he said by telephone.

Hua Nan Securities Investment Management Co (華南永昌投顧) said the four government funds could purchase those shares offloaded by the government during after-hours trading in a bid to render limited the impact on the local market.

However, Yuanta Securities Corp (元大證券) analyst Renee Yang (楊文靚) expressed concerns over the local stock market’s prospects.

“The share sale would dent wider market sentiment,” Yang said in a note. “Chances are that the four government funds would sell those shares some other time to take profits, therefore the move is still negative for the market.”

The benchmark TAIEX closed yesterday 0.6 percent higher at 7,903.38 on the Taiwan Stock Exchange on thin turnover of NT$62.72 billion.

Under the Cabinet’s annual budget plan for next year, the projected expenditure represents a 1.7 percent increase compared with this year’s NT$1.9076 trillion, while annual income is expected to decline by 0.1 percent from NT$1.7333 trillion, the first decline since 2010.

The Cabinet said the government would increase its spending on public construction projects by 10 percent to NT$192.5 billion next year as part of its efforts to stimulate economic growth.

The Cabinet is scheduled to finalize its annual budget plan on Aug. 22 and will then submit the plan to the Legislative Yuan for review and final approval when the legislature convenes its next session next month.

Additional reporting by Shih Hsiu-chuan and Amy Su