Investors yesterday panicked over the post-election political instability, dragging the TAIEX down by 455.17 points, or 6.68 percent, to close at 6,359.92 points, the biggest percentage drop since January 1996.
Turnover shrank significantly, with about NT$47.03 billion worth of shares changing hands yesterday, compared with NT$162.2 billion on Friday, a day before the election. Decliners outnumbered advancers 941 to 23, while five issues ended the day unchanged.
Despite the benchmark index shedding nearly the daily 7 percent limit, Minister of Finance Lin Chuan (林全) said that the government hasn't reached any decision to activate the National Stabilization Fund to prop up the TAIEX.
"The post-election decline constitutes a non-economic factor to rock the TAIEX," Lin told a press conference yesterday during the session, aiming to calm investors down.
"But whether it is so `irrational' that the governmental fund should be immediately activated [to boost the TAIEX] is questionable," he said.
The government will closely monitor the market's performance for the next two days before taking any action, he added.
As of press time, the government had not called for any committee meetings to discuss whether it would bolster the stock market today.
Hsieh Chin-ho (謝金河), executive director of the Chinese-language monthly Wealth Magazine, yesterday threw his support behind the government's decision to respect the market mechanism.
"The market is likely to stop bleeding after it hits a low of 6,000 points, at which point many investors will be interested in bottom fishing," Hsieh said, adding that local shares are still a worthwhile investment with a low price-to-earnings ratio.
Lin said the government has no plan to narrow the 7 percent daily limit to prevent stocks from tumbling, since such a makeshift measure will stymie the market's long-term development and internationalization.
He also downplayed yesterday's stock fluctuation, noting that more foreign investors, who own about one-fifth of the market's total value, did bottom-fishing than offloading.
Overseas investors yesterday bought NT$7.55 billion (US$226 million) more stocks than they sold, according to the Taiwan Stock Exchange Corp.
Foreign investors, nevertheless, yesterday expressed deep concern over the negative impact of lingering political uncertainty while showing hesitation in putting down investment in the local benchmark.
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