Stabilization fund staying out of stock markets, for now: official

2019/05/14 13:55:45 fontsize-small fontsize-default fontsize-big
Stabilization fund staying out of stock markets, for now: official

Taipei, May 14 (CNA) Taiwan's National Financial Stabilization Fund will not intervene in local stock markets at the moment, despite growing global market volatility caused by rising trade tensions between the United States and China, a financial official said Tuesday.

Vice Finance Minister Juan Ching-hwa (阮清華), the executive secretary of the stabilization fund, told CNA that compared with markets in the U.S. and Europe, markets in Taiwan remained resilient and there was no reason yet for the fund to discuss intervention.

Juan said, however, that the stabilization fund will continue to watch the local stock markets closely amid the escalating trade tensions between Washington and Beijing.

Though the fund did not intervene in local markets Tuesday, analysts said government-led funds such as the pension fund and labor insurance fund did step in to prop up shares and bolster market confidence, helping shares recover after a rough opening.

The weighted index on the Taiwan Stock Exchange (TWSE), the Taiex, lost 39.04 points, or 0.37 percent, to close at 10,519.25 after hitting an early low of 10,363.02, on turnover of NT$139.43 billion (US$4.48 billion).

The market reacted initially to a 2.38 percent plunge in the Dow Jones Industrial Average on Wall Street overnight, while markets in Germany and France shed 1.52 percent and 1.22 percent, respectively.

The NT$500 billion stabilization fund was set up in 2000 by the government to serve as a buffer against unexpected external factors disrupting the local bourse.

The fund intervenes in the market when it receives authorization from the fund committee, which is currently managed by Juan.

Global markets reacted nervously after China issued retaliatory tariffs in response to the U.S. move in Friday to increase punitive tariffs on US$200 billion worth of imported Chinese goods to 25 percent from 10 percent.

Further ratcheting up tensions, the U.S. Trade Representative office on Monday released a list of US$300 billion worth of additional products imported from China on which 25 percent tariffs could be imposed.

Juan said equity markets tended to react first to the latest developments of major events like the Washington-Beijing trade dispute, but share prices would revert to reacting to economic fundamentals once investors calmed down.

He said the pace of local economic growth remained stable despite weakening global demand, and argued that domestic demand will gain strength as a growing number of Taiwanese companies that operate overseas return to Taiwan.

Data compiled by the Ministry of Economic Affairs (MOEA) showed that 52 Taiwanese companies operating abroad have pledged to invest NT$279.5 billion in Taiwan so far this year amid trade worries.

The MOEA offered an incentive package in January to encourage Taiwanese companies that shifted their operations overseas in recent decades, especially to China, to return to Taiwan to invest.

(By Wu Chia-jung, Wen Kuei-hsiang and Frances Huang)
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