MOF induces investment firms to cut lending rates

The China Post staff

In another move to help support the Taiwan stock market, the Ministry of Finance (MOF) has successfully prodded securities finance and securities brokerage houses to cut their interest rates for funds lent to stock investors. In an attempt to stop the slide of share prices, Finance Minister Yen Ching-chang announced during the mid-session yesterday morning that domestic investment trust companies have started handling NT$15 billion in stock investments for the government’s civil service pension fund. Other government funds will boost the capital for such discretionary investment account management to around NT$100 billion by the end of the year. Yen also announced that the Securities and Futures Commission (SFC) under the MOF will talk with leading securities firms to reduce their interest rates and alleviate the cost for investors since almost all banks in Taiwan have already cut their interest rates. The weighted stock price index on the Taiwan Stock Exchange dropped 50.67 points at opening due to overnight losses on the U.S. stock market.

But investors seemed to start regaining confidence after Yen’s statement and other officials’ strong defense of Taiwan’s economic health in reaction to a negative report by Time magazine that predicts Taiwan might incur the worst economic performance in three decades. The index managed to rise 3.3 points, or 0.08 percent, to close at 4,371.99, although the daily transaction value remained thin at NT$44.3 billion.

At a meeting chaired by SFC Vice Chairman Ting Ke-hua in the afternoon, four securities finance companies and five securities brokerage houses agreed to shave their interest rates. Fuh-Hwa Securities Finance Corp., the leading securities finance firm in Taiwan, will cut its rate by 0.52 of a percentage point to 8.68 percent beginning tomorrow. The other three securities finance firms, including Fubon and Entie, will lower their rates by 0.5 of a percentage point between tomorrow and July 24. All of the four companies will also reduce the interest rate on funds lent to customers engaged in short-selling for margin trading to 2 percent from the current 2.5 percent. Five leading securities brokerage houses, which also provide securities finance services to their customers, will reduce their rate by a range of from 0.25 to 0.50 of a percentage point.

They include Yuanta Core Pacific, Polaris, Fubon, Jih Sun, and President. In a relevant development, the economic task force under the Executive Yuan is scheduled to hold a meeting on Thursday to review a plan allowing unlisted companies that meet certain criteria to have their shares traded on the stock trading floor of securities companies. The move will formally legalize the current underground transaction of shares from firms that have yet to be listed on the two stock exchanges.