The TAIEX yesterday rallied the most since December 2011, after the government said it would tap the National Financial Stabilization Fund (國安基金) for the first time in four years and spend as much as NT$500 billion (US$15.21 billion).
The benchmark index extended gains after the afternoon announcement, rising 3.58 percent to 7,675.64 points at the close, following a 4.84 percent plunge on Monday.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the most heavily weighted stock in the market, saw shares jump 7.39 percent to close at NT$123.5, Taiwan Stock Exchange data showed.
Photo: Pichi Chuang, Reuters
The fund authorized its managers to buy equities, with the timing of purchases subject to market conditions, Vice Premier Simon Chang (張善政) said at a briefing following an emergency meeting of the National Stabilization Fund Committee.
The Cabinet resolved to authorize Vice Minister of Finance Wu Tang-chieh (吳當傑), the committee’s executive secretary, to use the fund to prop up the market “depending on the situation,” Chang said.
Local shares have taken a deeper dive than those of other nations, showing that investor confidence in Taiwan is weaker, Wu said.
The last time the government tapped the fund was in 2011, following the death of former North Korean leader Kim Jong-il. On that occasion, the government stayed in the market through the end of 2012.
Chang said that the authorization does not mean that the fund would definitely be used.
The fund committee is scheduled to meet again on Oct. 15, when the operation and authorization is to be reviewed, he added.
Officials also said they would relax rules on financial companies’ investments in shares.
“The government’s pledge to support the market and authorization for the national stabilization fund to buy stocks help market confidence,” Fuh Hwa Securities Investment Trust Co (復華投信) chief investment officer John Chiu (邱明強) said.
The TAIEX has tumbled 23 percent since hitting a 15-year high on April 27, sending valuations to the lowest levels since 2008, amid speculation that China’s economic slowdown and currency devaluation is to curb demand for Taiwan’s technology products.
Additional reporting by Alison Hsiao
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