The National Financial Stabilization Fund will continue lending support to the local equity market, the management committee of the fund announced on Thursday following a regular committee meeting.
Since its entry into the stock market on July 13, the fund had, as of late last month, invested NT$11.208 billion (US$354.92 million) over 57 trading sessions, said Deputy Minister of Finance Juan Ching-hwa (阮清華), who serves as executive secretary of the stabilization fund committee.
The committee’s financial report shows that the investments incurred an unrealized loss of NT$816 million and a dividend income of NT$11 million, which resulted in a negative rate of return of 7 percent, he said.
The stabilization fund received authorization from its management committee on July 12 to enter the local stock market as Taiwanese stocks continued their downward trend, dragged down by a global stock slump.
The TAIEX entered a bear market earlier this year as foreign institutional investors sold a net NT$1 trillion of local stocks on the main board in the first half of the year.
After the TAIEX plunged to an intraday low of 13,928 points on July 12 — dropping 25.19 percent from this year’s high of 18,619 — the committee decided at an extraordinary meeting to allow the fund to intervene to prop up the market.
With the aid of the stabilization fund, Taiwanese shares staged a strong rebound in August, with the index returning to the 15,000-point mark.
However, the US Federal Reserve’s interest rate hikes last month not only pushed US stocks down, but also led Taiwan’s stock market back into a bear market.
On Monday last week, Taiwanese shares plunged following the Fed’s latest rate hike the previous week, with the TAIEX shedding 340.19 points, or 2.41 percent, to close at 13,778.19, the lowest in 22 months and below the 13,950-point mark, seen as the threshold for intervention by the stabilization fund.
In addition to intervening in the market to prop up share prices, the fund also aims to help “stabilize the market,” Juan said.
So far, Taiwanese stocks have outperformed other major stock markets such as the US, China, Hong Kong and South Korea during the same period, indicating that the fund has helped mitigate the impact of a sharp decline in local stocks, he added.
The last time the fund had entered the market was in March 2020 during the first local COVID-19 outbreak, when the fund invested less than NT$800 million over 207 trading sessions and helped the TAIEX rebound 49 percent to 10,000 points.
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