Finance chief denies fund intervention is imminent

Seeking to dispel rumors of pending government intervention in the stock market, the country's finance chief denied yesterday that a special meeting of the the National Stabilization Fund (國安基金) was planned and also said that the ministry is not considering a reduction in the daily volatility limit on stocks.

Following Fridays drop of 308 points, the TAIEX managed to rebound 65.37 points yesterday and closed at 6,677 points. Rumors circulated that Finance Minister Shea Jia-dong (許嘉棟) would call a Stabilization Fund meeting yesterday to address concerns over the ailing bourse. In addition, some reports called for the ministry to cut the daily volatility limit on stocks to 3.5 percent from 7 percent.

Meanwhile, several academics warned last week that if the stock market keeps on falling, it's likely to trigger a financial crisis. Lee Jeng-fu (李正福), an economic advisor to former President Lee Teng-hui (李登輝) and a finance professor at Rutgers University, told local media last week that if the TAIEX falls another 500 points, it could trigger a domestic financial crisis.

Other academics have suggested recently that a "catastrophe of non-economic factors," one of the prerequisites for the Stabilization Fund, should be more loosely defined in order to provide a more legitimate reason for the National Stabilization Fund to intervene in the stock market.

Responding to comments from Wei Chi-lin (魏啟林), Secretary General of the Cabinet, that the ministry should reduce the daily volatility limit on shares in order to revive the stock market, Shea said yesterday "the market is going to recover shortly, and [therefore] it's not necessary to reduce the limits at this time. Taiwan's stock market is behaving normally ... in the short-term, some minor volatility is unavoidable. But the trading situation is getting better now. I believe the stock market will recover this week."

"Currently the market [environment] is not appropriate for the Stabilization Fund to intervene," said Shea.

The steering committee of the National Stabilization Fund is scheduled to hold a meeting later this week, according to Shea. The committee holds a regular meeting at the end of every quarter to discuss its financial status and the performance of the various fund portfolios.

Chung Ching (鍾琴), spokeswoman of the Executive Yuan and the Government Information Office director general, also made comments yesterday about the stock market.

"Ministers have been discussing economic policies pertaining to the market. The Ministry of Finance and the Central Bank of China both have both held discussions about possible stimulus measures this morning, and, in addition, we are making arrangement for a number of electronics companies to conduct press conference on their business performance."

"The recent decline in US high-tech shares has been beyond the expectation of local investors, but it is only a short-term phenomenon," said Chung. "Orders for domestic high-tech companies like TSMC and UMC have been placed through next year, therefore they should not be affected by the US market. Meanwhile, international oil prices have been stabilized, so we should be able to minimize its impact on the domestic economy."