Finance authorities held an emergency meeting yesterday after Taiwan's main stock market index plummeted to its lowest level this year.
Four out of every five stocks fell as Taiwan's benchmark index closed at 8,120.89, down 244.74, or 2.9 percent.
Yesterday's drop came amid heightened political concern about relations with China and as some brokerages sold stocks before the fiscal year ends today.
The decision by the central bank earlier this week to raise interest rates 12.5 basis points also scared investor away.
Responding to the market turmoil, government officials unveiled incentive measures aimed at snuffing out investor jitters.
According to the CNYes.com news agency, the government will make it easier for investors to buy stocks on margin, or borrowed money.
The Ministry of Finance (財政部) will also make it more expensive for investors to bet against stocks by selling them short.
Effective tomorrow, the stock margin buying limit for TAIEX shares will rise to 60 percent from 50 percent. At the same time, the short-sale deposit ratio will be raised to 90 percent from 70 percent.
Investors will have to pay more to sell stocks short, a trading technique in which an investor borrows shares and then sells them in the hope of buying them back later for less.
The measures are expected to inject needed capital into the markets.
According to one Cabinet official, financial authorities will order government funds to intervene if the bourse continues to fall after yesterday's new low.
The funds are to be derived from the postal savings' fund, civil servants' pension funds and a labor insurance fund.
"The finance ministry would coordinate four government-related funds to enter the stock market," said Cabinet Secretary General Wea Chi-lin (
That meeting -- called at the request of Premier Tang Fei (
While the index has fallen in 15 out of the last 17 sessions -- shedding about 1,000 points since early June -- the Government Information Office (GIO,
Officials believe strong economic fundamentals will ultimately cause the market to rebound, the GIO added.
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