Taipei, Jan. 17 (CNA) Vice Finance Minister Wu Tang-chieh (吳當傑) said Saturday that the National Financial Stabilization Fund will continue to support Taiwan's stock market on Jan. 18 to fend off the impact of a plunge on Wall Street and European markets on Friday.
Wu, the executive secretary and manager of the financial stabilization fund, did not respond to concerns over the results of the national general elections on Saturday, which have raised fears of the possible deterioration in cross-strait ties.
Tsai Ing-wen (蔡英文), the candidate of the opposition Democratic Progressive Party (DPP), easily defeated Eric Chu (朱立倫) of the ruling Kuomintang (KMT) and James Soong (宋楚瑜) of the smaller People First Party.
Though Tsai has stressed she will maintain the status quo in relations with China, the DPP is known for its support for Taiwan's sovereignty and independence and resistance to businesses developing close ties with Chinese companies, in contrast to the KMT's friendly attitude toward China.
The change in the political landscape has led some investors to worry that the KMT's defeat could have an adverse impact on the performance of Taiwan's stock market on Monday.
Saying he respected the outcome of the elections, Wu indicated that their conclusion removes an element of political uncertainty that had been hanging over the market, even if the result was widely expected.
His bigger concern, however, is the negative effect of volatility in the global financial markets, which fell sharply on Friday amid lingering worries over further weakness in international crude oil prices.
On Friday, the Dow Jones Industrial Average tumbled 2.39 percent, while the markets in Germany and France plunged 2.38 percent and 2.54 percent, respectively, after international crude oil prices fell below the US$30 mark per barrel.
Wu said the financial stabilization fund will continue to keep a close eye on the reaction of Taiwan's market to the global losses at the end of last week, and if shares face any unreasonable selling Monday, the fund will jump in to restore investors' confidence.
The NT$500 billion (US$14.79 billion) stabilization fund is a mechanism set up by the government to serve as a buffer against unexpected external factors that disrupt the bourse.
The fund, which has been in existence since February 2000, intervenes in the market when it receives authorization from the fund committee.
The stabilization fund has made its presence felt since August, when Taiwan's market was hurt by a weakening Chinese yuan and global volatility.
The fund committee has authorized the fund to buy local shares until it holds a review meeting in the afternoon of Jan. 18 to decide whether the intervention will continue.
Tseng Ming-chung (曾銘宗), chairman of the Financial Supervisory Commission (FSC), said the local market will only stabilize if the Chinese yuan turns stable and the equity markets in the United States and Europe stage rebound.
But Tseng said Taiwan's stock market is expected to get support from Taiwan's improving economic fundamentals, as the economy is expected to grow 2.32 percent this year after an estimated 1.06 percent increase last year.
Tseng said he expected further interest rate hikes in the U.S. and moves by other economies to cut rates to send ripples through the non-U.S. dollar currency markets, which is likely to increase the risks to investors in Taiwan's stock market.
(By Chiu Po-sheng, Tsai Yi-chu and Frances Huang; click here for the full coverage of the elections.)enditem/ls