The Ministry of Finance on Saturday urged investors to remain confident in the local stock market after a wave of selling gripped global markets last week amid an outbreak of COVID-19, saying that domestically the virus was under control and Taiwan has sound economic fundamentals.
Deputy Minister of Finance Frank Juan (阮清華), the executive secretary of the National Stabilization Fund, said that the government was closely monitoring the local stock market and might take action if necessary, the Chinese-language Liberty Times (the sister newspaper of the Taipei Times) reported yesterday.
The NT$500 billion (US$16.5 billion) fund is a mechanism set up by the government to serve as a buffer against unexpected external factors that disrupt the local stock market.
The TAIEX fell by 394.18 points, or 3.37 percent, last week to close at 11,292.17 on Thursday following Wall Street’s loss of about 2,000 points from Monday to Wednesday. The local market was closed on Friday for the 228 Memorial Day holiday.
Given steep declines in European and Asian equity markets as well as a more than 12 percent fall on the Dow Jones Industrial Average last week, some fear that the TAIEX would fall further when trading resumes today.
The government could call an impromptu meeting and enact the state-run fund to maintain stability in the market, if any major events or drastic movements of international funds lead the market out of order or damage national stability, Juan told the Liberty Times.
Allianz Global Investors Taiwan Ltd (安聯投信) expects the market correction to last a while, given the absence of clear direction for equity investment, as the spread of COVID-19 has not eased.
Even though factory production in China has resumed, the visibility of supply and demand for the second quarter remains relatively chaotic at this stage, Allianz said in a note after the market closed on Thursday.
“European and US stock markets need to stop falling first before Taiwanese stocks have an opportunity to stabilize,” Allianz said.
How foreign institutional investors act and the second-quarter outlook for heavyweight Taiwanese firms would be critical in predicting the direction of Taiwanese stocks, it added.
Foreign investors last week sold a net NT$94.44 billion of shares on the main bourse after selling a net NT$33.34 billion in the previous week, Taiwan Stock Exchange data showed.
Overall, foreign investors sold a net NT$130.04 billion of shares on the main bourse last month, up from a net selling of NT$42.63 billion in January, the data showed.
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