The TAIEX on Thursday plunged 6.31 percent to close below 10,000 points — its largest one-day drop of all time — after a wave of selling gripped global markets. Fortunately, the benchmark index staged a rebound the next day and recovered 2.44 percent to close at 10,045.81 points, above that psychologically important mark.
While across-the-board sell-offs in Asian equities ended on Friday, market uncertainties remain and Taiwan — from the government to companies and investors — must prepare for the greater frequency of threats such as market volatility, trade disputes, geopolitical tensions and the possibility of another recession in the global economy.
Despite Taiwan having sound economic fundamentals and ample foreign-exchange reserves with no foreign debt, global risks cannot be held at bay. They will rematerialize and extend their destructive effects through various asset classes and to the major economies of Asia, including Taiwan.
The world is experiencing a trend away from multilateralism and toward unilateralism, with governments struggling to reach a consensus on how to calm markets and restore growth. Being reliant on exports, Taiwan faces many risks that are external, but which are beyond its control — everyone must look out for potential threats.
More worrisome is that investors have the bad habit of expecting the government to prop up local equities every time they drop. While everyone knows that the local bourse should reflect fundamental factors, it has become an unwritten rule that the government must intervene and arrest any sharp fall.
Calls last week for the government to activate the National Stabilization Fund when stock prices showed a substantial correction — despite few signs of market disorder — highlighted this mindset among some people. The NT$500 billion (US$16.18 billion) fund is meant to keep the nation’s economy and capital markets steady in times of crisis and when non-economic factors are weighing on the market.
The fund is an emergency mechanism. It should enter the market swiftly, buy up stocks more vigorously than other government efforts and exit as soon as the market stabilizes. Moreover, it should be a last-ditch attempt to boost the market when efforts by other government funds to regain investor confidence — the Labor Insurance Fund, the Labor Pension Fund, the Civil Servant Pension Fund and the Postal Savings Fund — have all been in vain.
However, the state-run fund is a double-edged sword that could help or hurt the local market. It can restore investor confidence, but it can also send the message that returns on local equity investments are guaranteed, because the fund can be relied on to buy when the market is low.
Perhaps with this in mind, the fund management committee on Thursday evening decided it was not the right time to enter the market, an indication that the government remains confident in company fundamentals and considers this plunge in the market not to have been as bad as the previous six times that the fund was activated.
If the government has a sincere desire to prop up the stock market, it should avoid intervening directly, because intervention can only delay a fall and prevent the market from hitting bottom.
Avoiding intervention is definitely the way to help the market return to normal, as global and local economic fundamentals remain stable and growth momentum is sure to resume, despite some short-term volatility in the markets. Instead, the government should do more to eliminate investor uncertainty over domestic investment and implement economic policies that are more consistent.
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
Singaporean Prime Minister Lee Hsien Loong’s (李顯龍) decision to step down after 19 years and hand power to his deputy, Lawrence Wong (黃循財), on May 15 was expected — though, perhaps, not so soon. Most political analysts had been eyeing an end-of-year handover, to ensure more time for Wong to study and shadow the role, ahead of general elections that must be called by November next year. Wong — who is currently both deputy prime minister and minister of finance — would need a combination of fresh ideas, wisdom and experience as he writes the nation’s next chapter. The world that
The past few months have seen tremendous strides in India’s journey to develop a vibrant semiconductor and electronics ecosystem. The nation’s established prowess in information technology (IT) has earned it much-needed revenue and prestige across the globe. Now, through the convergence of engineering talent, supportive government policies, an expanding market and technologically adaptive entrepreneurship, India is striving to become part of global electronics and semiconductor supply chains. Indian Prime Minister Narendra Modi’s Vision of “Make in India” and “Design in India” has been the guiding force behind the government’s incentive schemes that span skilling, design, fabrication, assembly, testing and packaging, and
Can US dialogue and cooperation with the communist dictatorship in Beijing help avert a Taiwan Strait crisis? Or is US President Joe Biden playing into Chinese President Xi Jinping’s (習近平) hands? With America preoccupied with the wars in Europe and the Middle East, Biden is seeking better relations with Xi’s regime. The goal is to responsibly manage US-China competition and prevent unintended conflict, thereby hoping to create greater space for the two countries to work together in areas where their interests align. The existing wars have already stretched US military resources thin, and the last thing Biden wants is yet another war.