After government officials instructed the postal savings fund to buy NT$300 billion in shares, the TAIEX rose more than 200 points yesterday.
But the move failed to hold the benchmark index above 8,000 points and the market ended up 61 points at 7,961.54 on turnover of NT$75.3 billion.
Analysts said the TAIEX is expected to consolidate between 7,500 to 8,000 points in the near term.
After the TAIEX dropped below the psychologically significant level of 8,000 points Tuesday, Executive Yuan officials made the decision to raise the postal fund from NT$150 billion to NT$300 billion.
Four government funds bought heavily in yesterday's early trading, triggering a strong rebound, but the TAIEX failed to maintain its level in the second half of trading.
Speaking after yesterday's close, deputy finance minister Yen Ching-chang (
According to a recent report by the Hong Kong Standard, China may soon conduct military exercises off Taiwan's southeast coast, a move that has further eroded investor confidence.
"According to past experience, investors who sell during a China military exercise or other political event. Those who buy at the low will profit later on," said Minister of Finance Shea Jia-dong (
"The recent decline in the market has been influenced by psychological factors, and concerns over China's military exercise may make it even weaker," Shea said.
"The Ministry of Finance will do its best to stabilize the market. Also if Liu Tai-ying (
Liu met with President Chen Shui-bian (陳水扁) Tuesday night, allegedly to offer the president his views on how to stabilize the stock market.
"Since the KMT controls huge amounts of party assets and maintains long-term ties to the financial services industry, its maneuvering ability in the stock market is much better than the DPP's," said Henry Cheng (
"It's one of the important reasons that the new administration has been unable to pull up the TAIEX recently. Taking into consideration all other factors, the TAIEX is likely to consolidate between 7,500 and 8,000 points, before dropping below 7,000 points in the next month or so," Cheng said.
"With daily turnover at under NT$100 billion -- far below the normal NT$100 to NT$200 billion turnover levels -- the lack of investor confidence is clear. The new administration has to regain investor confidence by offering trustworthy fiscal and other economic policy," Cheng said.
"The new administration is currently letting the NT dollar depreciate slowly, in order to cope with the depreciation of South East Asian currencies.
"It is to maintain Taiwan exporters' competitiveness and sources of fiscal revenue. On the other hand, the new administration will have to cut waste and unnecessary expenditures from the old administration.
"If the new administration could conduct a sound fiscal policy in the next four years, there is a great chance for it to win the next presidential election," Cheng said.
"However, investors so far are not convinced that the new administration is capable of accomplishing its campaign promises. The recent Pachang Creek (
"Before the legislative election at the end of next year, the new administration has to prove itself capable of handing government policy effectively. Otherwise the stock market will only reflect what's going on immediately, regardless of government attempts to intervene," Cheng said.
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