Taipei, April 14 (CNA) A decision to withdraw the National Financial Stabilization Fund from the stock market after a nine-month intervention is unlikely to affect share prices, as the domestic economy and equity market have stabilized, Vice Premier Cheng Wen-tsan (鄭文燦) said Friday.
Speaking on the sidelines of a legislative hearing, Cheng said it also appeared that foreign institutional investors were ready to rebuild their holdings in the local stock market, which is another reason why the stabilization fund committee decided during a meeting Thursday to terminate its intervention in the market.
While the fund will unload the shares it had acquired during its 275-day intervention to pocket its gains, that will not affect the movement of stock prices, he said.
“The stabilization fund always comes without a shadow and leaves without a footprint,” Cheng said.
The NT$500 billion (US$16.43 billion) 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.
On July 12, 2022, after the close of the stock market, the fund’s committee decided to allow its intervention in the market, after the Taiex, the benchmark weighted index on the Taiwan Stock Exchange (TWSE), dipped below 14,000 points that day, amid escalating fears over growing interest rates in the United States, which were sending global financial markets into a tailspin.
The 275-day intervention, which included 181 trading sessions, was the longest in the fund’s history, after the 232 days recorded from 2015 into 2016, when the global financial markets were being hit by heavy losses on the European equity markets.
As of the end of March, the stabilization fund had injected some NT$54.51 billion into the Taiwan stock market in its latest intervention, in a bid to shore up share prices and boost investor confidence, according to the committee.
The figure was the third highest recorded since the fund’s establishment, following the NT$60 billion it invested in 2008, and NT$54.5 billion in 2021.
Since the fund entered the market on July 13 last year, the Taiex has rebounded 1,854.14 points, or 13.29 percent, and ended at 15,804.76 on Thursday.
The rebound on the Taiex only trailed a 19.12 percent increase recorded by the Philadelphia Semiconductor Index on the U.S. markets but was better than other three U.S. indexes — the Dow Jones Industrial Average, the broader S&P 500 index, and the tech-heavy Nasdaq index, as well as the markets in South Korea, Japan, China and Hong Kong.
As of the end of March, the fund had recorded NT$7.901 billion in unrealized profit and received more than NT$400 million in cash dividend income, Deputy Finance Minister Juan Ching-hwa (阮清華) said at a press conference Thursday.
It had also recorded an unrealized return of about 15 percent, and can now leave the market after a successful intervention, said Juan, who serves as executive secretary on the stabilization fund committee.
Nonetheless, he said, the committee will stay alert to factors such as the escalating trade tensions between the United States and China, the ongoing interest rate hikes by the major central banks around the world, high inflation, and geopolitical crises, which can all affect the movement of global financial markets.
