Minister of Finance Lee Sush-der (李述德) said yesterday the National Stabilization Fund (國安基金) would not make any adjustments in the near future despite the fact it gained nearly NT$10 billion (US$296 million) in book value in the last seven months.
Lee issued the comments while taking questions from Chinese Nationalist Party (KMT) Legislator Lin Teh-fu (林德福) at the Legislative Yuan’s Finance Committee about whether the Ministry of Finance (MOF) would consider materializing the profits.
Lee said the fund, intended to stabilize the equities market, had increased by about NT$10 billion in book value after entering the local bourse in September last year, when the TAIEX stood at around 5,800 points.
The main bourse fell yesterday in line with weaker regional markets after a Wall Street loss on Tuesday. The benchmark TAIEX dropped 17.49 points, or 0.29 percent, to close at 5,875.19 on the Taiwan Stock Exchange. The index has risen 28 percent so far this year, stock exchange data showed.
“The fund had better stay put in the short term as many remain divided about the financial market’s performance, though the index has recovered to the 5,800-point mark,” Lee said. “It should stick to its mission and operate in a stable and cautious manner.”
On Monday, the management committee of the state-owned National Stabilization Fund said it had decided not to sell the equities it had purchased to stabilize the stock market. The fund injected some NT$60 billion into the stock market in the last three months of last year, it said.
Lin yesterday questioned the wisdom of such inaction, saying that the profits could evaporate once the recent stock rallies come to an end.
But Lee said the fund was not profit-oriented and the government would bear the consequences of its decision.
The minister assured the lawmakers that the country’s fiscal condition remained stable despite rising debt attributable to stimulus measures to battle the recession.
The increasing government spending led Standard & Poor’s Ratings Services (S&P) on Tuesday to downgrade its outlook on Taiwan’s sovereign rating to “negative” from “stable.”
“What S&P said about the nation’s fiscal condition is objective and true,” Lee said. “It is also true the state coffers will make do, despite the strain.”
Financial shares ended lower after the S&P report.
Cathay Financial Holding Co (國泰金控), Taiwan’s biggest listed financial-services company, declined 0.3 percent to NT$35.55, while Fubon Financial Holding Co (富邦金控), the second-largest, retreated 0.8 percent to NT$25.90.
“The financial industry is already in very poor health, so a bad report by S&P only serves to crush investor confidence further,” said Stanley Chou, a trader at Mega International Investment Service Corp (兆豐國際投顧).
S&P said in a statement on Tuesday liabilities in the financial sector may exceed 48 percent of GDP in a worst-case economic downturn.
ADDITIONAL REPORTING BY BLOOMBERG
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