Top government officials formulated six new emergency measures to counter yesterday's 322-point tumble of the stock market.
Investor confidence collapsed at the opening bell after Chinese-language media circulated reports of insider trading at the National Stabilization Fund (國安基金) and the exodus of the fund from the market.
PHOTO: LU CHUN-WEI, TAIPEI TIMES
Setting off the heavy selling pressure was a Commercial Times report that the Stabilization Fund would discontinue intervention measures for the time being. The TAIEX plummeted 322.14 points on the news yesterday to close at 4,845.21 points on turnover of NT$45.6 billion -- its first swing below 5,000 points since March 1996.
Reacting to the massive slide, finance officials huddled at the Executive Yuan last night, with Minister of Finance Yen Ching-chang (
The new measures include cutting the daily downward volatility-limit of the TAIEX, TAISDAQ and the TAIFEX futures market to 3.5 percent from 7 percent, to remain in effect through the end of the year.
The plan also raised the ceiling on investments by qualified foreign institutional investors (QFII) in Taiwan stocks to US$2 billion from US$1.5 billion and lifts the limit on foreign investors' ownership of Taiwan companies to 100 percent from 75 percent. In addition, the government vowed to allocate NT$450 billion in funding to bail out traditional industries.
The weekend Chinese-media allegations -- that government officials who operate the Stabilization Fund were alleged to have been involved in insider trading -- seriously affected investor confidence as demonstrated by the immediate downward slide after the market opened. Government prosecutors are currently investigating the allegations.
Additional bad news came from reports by local newspapers that the Stabilization Fund would not intervene in the stock market for the short-term. One report said that the Executive Yuan had no intention to hold a fund management committee meeting since rumors of the president having an affair with one of his aides has further clouded stock market direction, making fund intervention useless.
The Stabilization Fund had been authorized by the management committee to intervene in the market through Nov. 15.
According to one analyst, turnover will be the indicator of market recovery in the short-term.
"Before turnover can be increased to NT$80 billion, the TAIEX is unlikely to halt the current downward trend," said Henry Cheng (
Institutional investors all stayed on the sidelines yesterday while foreign investors sold a net of NT$422.7 million.
Local mutual fund companies and securities dealers also jumped on board, selling off a net NT$2.44 billion and NT$0.9 billion respectively.
Meanwhile, speaking in the Legislative Yuan, Minister of Finance Yen Ching-chang (顏慶章) spoke out against the insider trading allegations.
"It's unlikely that any operator in the Stabilization Fund would reveal its trading activities to outsiders.
"The Taiwan Stock Exchange and Taiwan Futures Exchange launched an investigation into [the allegations] of share dumping [by the KMT last Thursday]," Yen said.
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