Finance minister open to stabilization fund expansion

Taipei, April 16 (CNA) Finance Minister Chuang Tsui-yun (莊翠雲) is open to expanding the NT$500 billion (US$15.37 billion) National Financial Stabilization Fund to more effectively counter the impact of negative external factors on the local stock market, she said Wednesday.

Speaking at a meeting of the Legislative Yuan's Finance Committee, Chuang said that given the significant rise in market capitalization in the past decade, the Ministry of Finance (MOF) is open to a possible expansion of the stabilization fund to make it more effective.

Last week, Chuang said at another legislative hearing that the MOF has studied the possibility of increasing the size of the stabilization fund.

She said it will deal with the issue after Democratic Progressive Party (DPP) lawmaker Kuo Kuo-wen (郭國文) initiates an amendment to the Statute for the Establishment and Administration of the National Financial Stabilization Fund that would raise the size of the fund to NT$1 trillion.

According to the statute, the financial stabilization fund has two sources of funding. One involves borrowing from financial institutions, collateralized by stock held by the National Treasury in public and private enterprises, with a ceiling of NT$200 billion.

The second involves borrowing from the postal deposit system, Postal Life Insurance Fund, Labor Insurance Fund, Labor Pension Fund, and Civil Servant Pension Fund, with a ceiling at NT$300 billion.

Kuo said he has proposed to remove the ceilings of the two borrowing sources to allow the fund to have flexibility in raising funds to counter turbulence in the market.

The stabilization fund was set up in 2000 by the government to serve as a buffer against unexpected external factors that might disrupt the local bourse.

According to Kuo, since the stabilization fund was established, the market's value has jumped to more than NT$70 trillion today from NT$8 trillion in 2000.

When the local stock market encountered headwinds from the Trump administration's tariff threats, the stabilization fund committee decided to intervene starting from April 8, marking the ninth intervention since its establishment.

Since the United States imposed a 32 percent tariff on goods from Taiwan on April 2, the Taiex had fallen 1,440.55 points, or 6.76 percent, to 19,857.67 as of Tuesday.

The index has recovered part of its steep losses from April 9, when the Taiex closed at 17,391.76, after Trump announced a 90-day pause on the new measures, with reduced 10 percent duties to be applied instead to all countries but China.

On Wednesday, Chuang said the stabilization fund has never used the second borrowing source and she believed the fund's executive secretary is very careful when managing the fund to support the market and shore up investor confidence.

Currently, the fund's executive secretary is Vice Finance Minister Juan Ching-hua (阮清華).

Chuang said she has also watched closely the decline in turnover in the local stock market as many investors preferred to stay on the sidelines amid tariff concerns, which have affected global economic conditions.

According to the MOF, the average combined turnover of the main board and the over-the-counter market shrank to NT$400.4 billion in March, down 27.4 percent from a year earlier.

Therefore, revenue from stock transaction taxes also fell to NT$21.9 billion in March, down 24.6 percent from a year earlier, marking the steepest decline in 26 months.