Stabilization fund rakes in NT$1.2 billion in net profit

The National Financial Stabilization Fund made a profit of about NT$1.2 billion (US$37.85 million) after disposing of shares it bought in the local equity market during its intervention from August 2015 to April 2016, according to statistics released by the Ministry of Finance (MOF).

During the intervention, the fund spent NT$19.658 billion buying shares in a bid to counteract negative impacts on the equity market, the data showed.

By Sept. 21, 2016, the stabilization fund had sold the shares it bought in 29 large-cap stocks from Aug. 25, 2015 to April 12, 2016. The net profit of NT$1.21 billion represented a 6.16 percent return on its investment.

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

The fund, which was created in February 2000, intervenes in the market when it receives authorization from the fund committee which is currently managed by Vice Finance Minister Su Jain-rong (???).

Following the sharp depreciation of the Chinese yuan against the U.S. dollar in August 2015, the fund committee under the Cabinet authorized the fund to intervene in a bid to curtail irrational selling on the local equity market.

The fund continued its presence after the presidential election held on Jan. 16, 2016, when the pro-independence Democratic Progressive Party won the poll, unseating China-friendly Kuomintang.

The intervention after the vote aimed to prevent non-economic factors from impacting equity prices and bolster investor confidence. The fund pulled out of the market in mid-April.

The National Treasury Administration (NTA) under the MOF confirmed that the stabilization fund did provide tremendous support to the local equity market during the intervention period.

During that period, the weighted index on the Taiwan Stock Exchange rose 856 points or 11.15 percent to close at 8,531 points on April 12.

The 29 stocks bought by the stabilization fund during the intervention included contract chip maker Taiwan Semiconductor Manufacturing Co. (TSMC,???), Formosa Chemicals & Fibre Co. (??), Formosa Plastics Corp. (??), food maker Uni-President Enterprises Corp. (??) and Fubon Financial Holding Co. (???), the NTA said.

Statistics show that the fund made NT$540 million in net profit by selling shares in TSMC, which is the most heavily weighted stock in Taiwan. The gains posted by investing in TSMC accounted for about 40 percent of total profit made during the intervention.

The NTA said that the stabilization fund disposed of the shares in an orderly manner so the sales had zero impact on the equity market.

The agency said that although the stabilization fund has exited the market, the fund committee continues to watch market conditions at home and abroad.

Source: Focus Taiwan News Channel