Government props up TAIEX

SELLING PRESSURE::Minister Philip Yang said the government had started buying equities via four funds, but it seems the National Stabilization Fund was not activated

By Amy Su  /  Staff Reporter

Wed, Aug 10, 2011 - Page 1

Government-run funds and bargain hunters yesterday helped Taiwan’s stock market offset heavy selling pressure after an overnight plunge on Wall Street as shares recouped most of their early losses.

The TAIEX fell 0.79 percent, or 59.68 points, to 7,493.12 yesterday, after hitting 7,148.76, a 5.35 percent tumble, in the morning session, Taiwan Stock Exchange data showed.

Turnover amounted to NT$202.71 billion (US$6.98 billion), the heaviest daily trading volume since Jan. 7 last year, with foreign investors’ net sales totaling NT$31.19 billion.

“The government’s intervention helped stabilize the stock market, offsetting the heavy pressure of foreign investors dumping their shares,” Tsai Ming-chang (蔡明彰), president of Marbo Securities Consultant Co (萬寶投顧), said by telephone.

Despite inflationary pressures, analysts said China was unlikely to maintain its policy of monetary tightening because of uncertainties in the global economy, another reason the Taiwanese market had the top performance in Asia yesterday, Tsai added.

Government Information Office Minister Philip Yang (楊永明) said the government had started buying equities via four funds — the labor insurance fund, the labor pension fund, the civil-servant pension fund and the postal fund.

“We took action yesterday [Monday] and this morning,” Yang said by telephone.

Yang declined to comment on whether the government has bought stock using the National Stabilization Fund (國安基金), while a member of the fund’s management committee said it did not hold a meeting yesterday, an indication that the fund has not been activated to prop up the local market.

Financial Supervisory Commission Vice Chairman Wu Tang-chieh (吳當傑) said there was little the government could do to stop foreign investors from selling their Taiwanese shares, after foreign fund outflows totaled US$1.81 billion this month as of yesterday.

Foreign funds account for about 30 percent of the local bourse’s capital, slightly lower than South Korea’s 33 percent, he said.

Kevin Hsiao (蕭正義), director of UBS Wealth Management Research in Taiwan, said the recent correction of global stock markets, including in Taiwan, had been overdone because of concerns of a global “double-dip” recession.

“The possibility of another financial tsunami happening in the near future is small when compared with the possibility of slowing, but continued growth in the global economy,” Hsiao told a media briefing.

Hsiao expects the US Federal Reserve to release an update on its next round of quantitative easing measures after a meeting of the Federal Open Market Committee scheduled for later yesterday. That would help stabilize the US market and drive up the global stock markets’ performance in the short term, he said.

However, recent uncertainties about the global economy may still lead Taiwan’s export-oriented economy to face more downside risks in the second half of the year, as lower growth in exports may drive down domestic consumption and investment, Hsiao said.

UBS has maintained its forecast for GDP growth this year at 4.5 percent, he added.

Additional reporting by Bloomberg and Crystal Hsu