Wed, May 19, 2004 - Page 1 News List

Stabilization Fund gets nod to prop up market


The government yesterday authorized the steering committee of the National Stabilization Fund to prop up the local stock market when necessary, Vice Minister of Finance Gordon Chen (陳樹) said yesterday.

Chen, also the committee's executive secretary, said the fund's 13-member committee reached a consensus that the recent decline in the TAIEX was irrational and the result of domestic political unrest and rising cross-strait tensions.

"The fund's activation aims to restore market confidence and stability," Chen said.

Stocks closed 1.36 percent higher in thin trading yesterday, steadying after Monday's heavy sell-off, on apparent support from government funds, dealers said.

Dealers said the government's relaxation of restrictions on foreign investment in the capital markets and hopes of support from the NT$500-billion National Stabilization Fund led to bargain-hunting after a recovery in regional equity markets.

The TAIEX closed up 74.72 points at 5,557.68, on turnover of NT$75.86 billion (US$2.25 billion). The market lost 5.10 percent on Monday, falling to 5,482.96, following a statement from China that President Chen Shui-bian (陳水扁) must accept Chinese sovereignty or ``face destruction by playing with fire.''

According to Gordon Chen, the committee is entitled to take out a NT$130 billion loan from banks to buy stocks at the "appropriate time."

At the same time, the government's four other state funds will be entitled to take out a NT$300 billion loan to buy shares, he added.

In light of the nation's improving economic fundamentals, Gordon Chen said, revenues for the nation's listed companies in the first three months grew by 28 percent from one year earlier while net profits grew by 133 percent.

Ups and downs

* The TAIEX gained 74.72 points to close at 5,557.68 yesterday.

* The market lost 5.10 percent on Monday after China warned President Chen Shui-bian against rejecting Chinese sovereignty.

* The TAIEX has slid 18 percent since Chen won a second term.

As the nation's listed companies have an average price/earnings ratio of 14.4 percent, Chen urged investors to remain calm and expressed hope that the government would not have to activate the fund.

The TAIEX has slid 18 percent since Chen won a second term by a margin of less than 30,000 out of 13 million votes cast.

Four years ago, the index dived as much as 4.6 percent because of concern Chen Shui-bian would worsen relations with China.

On the local bourse yesterday, a total of 23 stocks closed limit-up, while 19 were limit-down.

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