Taiwan's stabilization fund to continue intervening in stock market

10/06/2022 09:34 PM
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CNA file photo
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Taipei, Oct. 6 (CNA) The National Financial Stabilization Fund will continue lending support to the local equity market after having been active in the market this year since July, the management committee of the fund announced Thursday following a regular committee meeting.

Since the stabilization fund's entry into the stock market on July 13, it has invested NT$11.208 billion (US$354.93 million) in the market over 57 trading sessions as of late September, said Deputy Finance Minister Juan Ching-hwa (阮清華), who serves as executive secretary of the stabilization fund committee, citing the committee's financial statement.

According to the financial report, the investment incurred an unrealized loss of NT$816 million and a dividend income receivable of NT$11 million, which resulted in a negative rate of return of 7 percent, he said.

The stabilization fund received authorization from its management committee on July 12 to enter the local stock market as Taiwan stocks continued their downward trend, dragged down by a global stock slump.

Taiex in bear market

The Taiwan Stock Exchange's benchmark index, the Taiex, entered a bear market earlier this year as foreign institutional investors sold a net NT$1 trillion of their stock holdings on the main board in the first half.

After the Taiex plunged to its intraday low of 13,928 on July 12, which meant it had fallen by 25.19 percent from its year's high of 18,619, the committee decided to allow the intervention of the stabilization fund in the stock market following the conclusion of an extraordinary meeting that day.

With the presence of the stabilization fund in the stock market, shares in Taiwan staged a strong rebound in August, returning to the 15,000-point mark.

However, the U.S. Federal Reserve's hawkish interest rate hikes last month not only pushed U.S. stocks down but also led the Taiwan stock market into bear-market territory again.

U.S. rate hikes

On Sept. 26, Taiwan shares took a plunge after the Fed implemented its latest interest rate hike the previous week, with the Taiex falling by 340.19 points, or 2.41 percent, to close at 13,778.19, the lowest in 22 months and below the 13,950-point mark, seen as the threshold for intervention by the stabilization fund.

While the Taiex ended up 90.62 points, or 0.66 percent, at 13,892.05 on Thursday, it was still below the threshold.

The last round the fund had entered the market was in March 2020 during the outbreak of the COVID-19 epidemic, when the fund invested less than NT$800 million over 207 trading sessions and helped the Taiex recoup 49 percent to return to the 10,000-point mark.

In addition to intervening in the market to prop up share prices, the fund now also aims to help "stabilize the market," Juan emphasized.

So far, Taiwan stocks have outperformed other major stock markets such as the United States, China, Hong Kong and South Korea during the same period, indicating that the fund has helped mitigate the impact of the sharp decline in Taiwan stocks, he added.

(By Chang Ai and Evelyn Kao)


> Chinese Version

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After gaining 4.12% against the Taiwan dollar, and hitting a high of NT$31.871 in September, the greenback fell to NT$31.625 before the lunch break on the Taipei forex market on Friday.
After gaining 4.12% against the Taiwan dollar, and hitting a high of NT$31.871 in September, the greenback fell to NT$31.625 before the lunch break on the Taipei forex market on Friday.
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