Taipei, Taiwan's National Financial Stabilization Fund has no immediate plans to intervene in the stock market to prop up share prices in the wake of heavy losses is the last two sessions, Vice Finance Minister Su Jain-rong (???) said Tuesday.
Su, the executive secretary of the stabilization fund, told the press that the plunge, in particular the 4.95 percent drop on Tuesday, resulted from investors' efforts to lock in their gains from the recent sessions.
On Tuesday, the Taiwan Stock Exchange closed down 4.95 percent at 10,404.00 points after a 1.62 percent decline on Monday.
The heavy losses in the two sessions followed a 4.60 percent dive on Wall Street on Monday. The Dow Jones Industrial Average dropped 1,175.21 points, following a 2.54 percent fall on Friday, amid worry that the U.S. Federal Reserve will speed up the pace of interest rate hikes as the U.S. economy strengthens.
Su said the losses on Taiwan's equity market largely reflected the plunge on Wall Street as investors at home and abroad have sensed the risks of high valuations after the recent strong showing on the global equity market.
He said the decline had nothing to do with systematic risks, as during the last financial crisis, since the global economy was still growing.
The selling in equities at home and aboard is likely to be short-lived and the markets will stabilize when share prices return to normal, Su said.
It is not necessary, therefore, for the national stabilization to intervene, he said, adding that there are no immediate plans for the fund's commissioners to meet to discuss stimulus measures.
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 Su.
Su said he has confidence in the domestic economy, which has been growing in line with the world economy on solid global demand, and there are no grounds for the stabilization fund to intervene in the stock market.
His views echoed those of Wellington Koo (???), chairman of the Financial Supervisory Commission (FSC), who said Monday that investors should maintain confidence in the local equity market as the economic fundamentals remained sound.
Last week, the Directorate General of Budget, Accounting and Statistics reported that Taiwan's gross domestic product grew 3.28 percent year-on-year in the fourth quarter of 2017, beating the DGBAS' forecast of a 2.3 percent growth, largely on robust exports.
For the whole of 2017, Taiwan recorded 2.84 percent annual economic growth, better than the forecast 2.58 percent increase, the DGBAS's data showed.
In May 2017, the local main board stood above the 10,000 point mark for the first time and has remained above that level since then.
In December last year, Finance Minister Sheu Yu-jer (???) said that once the Taiex is above 10,000 points, the stabilization fund will not intervene.
Source: Fucus Taiwan