Taipei:Finance Minister Chuang Tsui-yun expressed support for a proposal to double the National Financial Stabilization Fund, emphasizing the need for increased flexibility in government interventions in the stock market amidst rising political and economic instability.
According to Focus Taiwan, the NT$500 billion fund, established in 2000, aims to shield Taiwan's stock market from unforeseen external events. The market capitalization of the local bourse has experienced a significant increase from NT$9.2 trillion in 2000 to its current level, necessitating a larger fund for effective market intervention.
Chuang noted that foreign institutional investors now hold 46.78 percent of total market capitalization, a substantial rise from 8.44 percent in 2000. The current fund size may struggle to address growing challenges in market interventions. Lawmakers have suggested amending the Statute for the Establishment and Administration of the National Financial Stabilization Fund to double its size to NT$1 trillion.
The fund's financing currently comes from two sources borrowing up to NT$200 billion from financial institutions, and NT$300 billion from the postal deposit system and various insurance and pension funds. Chuang highlighted that increasing the borrowing ceiling from financial institutions to NT$700 billion would enhance the fund's intervention capabilities.
Democratic Progressive Party lawmaker Kuo Kuo-wen, who proposed the amendment, warned that significant selling by foreign institutional investors could rapidly exhaust the fund. From early November to Tuesday, these investors sold a net NT$648.55 billion in shares on the Taiwan Stock Exchange's main board.
Chuang reassured that foreign investors operate based on their investment strategies and that Taiwan's economic fundamentals remain robust. Recently, the fund's management committee authorized a market intervention after a substantial decline in the Taiex, the Taiwan Stock Exchange's benchmark index, marking the fund's 10th intervention since 2000. Following the intervention, the Taiex rebounded by nearly 11.5 percent.
