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Cabinet to map out measures to woo foreign capital

The government will draw up measures to attract foreign capital to the stock market and increase investment by the four government-run funds in the domestic stock market, Premier Liu Chao-shiuan (劉兆玄) said yesterday.

Liu made the remarks at an emergency meeting called yesterday in response to the steep drop in the TAIEX and increasing inflationary pressure, Executive Yuan Spokeswoman Vanessa Shih (史亞平) said.

As of yesterday, the TAIEX had dropped 1,520 points, or 16.76 percent, since the new government took office on May 20.

Meanwhile, the Council for Economic Planning and Development said in a report yesterday that the economy showed signs of slowing down last month. The council assigned the economy a yellow-blue level for last month — the first since June last year.

The council said it put the economy at green for the six months preceding last month.

At the meeting, economic officials said a significant withdrawal of foreign capital was the main cause for the recent stock market slump, Shih said.

The stock market saw a surge between January and May 20 despite the downward trend in global markets as a result of the expectations for the presidential election and the Chinese Nationalist Party (KMT) regaining power, she said.

“During that period, foreign capital purchased a large amount of shares — amounting to NT$56.3 billion [US$1.85 billion]. After May 20, the local stock market began to drop, and this was because of profit-taking by foreign investors. Most of them sold more shares than they bought,” Shih said. “In comparison with the drop in other Asian countries — 9.7 percent in Tokyo, 19.3 percent on the Hang Seng Index, 25 percent on the Hong Kong listed H-share market and 14.14 percent in Singapore — the country’s stock market performed relatively well.”

Shih said the surge in global prices of fuel, food and raw materials and inflation also contributed to the drop in the stock market. The premier instructed economic officials yesterday to draw up measures to attract foreign capital back to the stock market, Shih said.

Liu assigned Vice Premier Paul Chiu (邱正雄) to convene a Cabinet-level task force to deal with the economic situation and Minister Without Portfolio Tsai Hsun-hsiung (蔡勳雄) to organize a task force to work to help the nation’s poor and those at risk of falling into poverty, Shih said.

The task forces are to meet once a week or on an ad hoc basis.

Later yesterday, Minister of Finance Lee Sush-der (李述德) told a press conference that the government might communicate with foreign investors, securities investment trusts and security dealers on the local stock market.

“We will let them know that the fundamentals of the local stock market have done well and that the government will support stable and sound stock market growth through the four government-run funds and the National Stabilization Fund,” Lee said.

The Cabinet will increase the portion of the four funds — the Civil Servant Pension Fund, the Labor Pension Fund, the Labor Insurance Fund and the Postal Savings Fund — that is invested in the stock market.

Additional reporting by CNA
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