Liu admits little can be done to save stock market

The China Post news staff

TAIPEI, Taiwan News — Premier Liu Chao-shiuan admitted yesterday the administration can do little to save the stock market in the financial crisis triggered by the rejection by the U.S. House of Representatives of President George W. Bush’s US$700 billion bailout. Questioned by Democratic Progressive Party lawmaker Tsai Huang-liang on the Legislative Yuan floor, Premier Liu said there is no “quick elixir-like panacea” for the economic woes which the new American stock market crash entails. “All that we can do,” Premier Liu said, “is to stanch the bleeding.” That’s not a cure.

The administration will do what it can to mitigate the adverse impact of the meltdown of the American financial system, Premier Liu promised. That includes the intervention by the National Stabilization Fund, the premier said. Established in 2000, the fund has to help shore up the market when it is affected by non-economic factors. Vice Premier Paul Chiu said in a press briefing that the fund “is monitoring the market and will enter it when necessary.” It is part of the six-point decision the Liu Cabinet made to cope with the imminent financial crisis facing Taiwan. Another measure the Cabinet has decided to take, Chiu said, is the limitation of the amount of borrowed shares that can be traded each day to 10 percent of a company’s listed stock. Prior to the decision, the amount limited was 25 percent. “Institutional investors will be limited to trading borrowed shares equivalent to no more than one percent of a company’s total listed shares,” Chiu said. It was 10 percent prior to the change. The limits on borrowed share trading were reduced to 0.3 percent from the current 3 percent of a listed company, Chiu said. Short selling remains banned.

The financial regulator placed the ban for two weeks on September 21. It did not say whether the ban would end tomorrow or would be extended. However, those companies that have borrowed short-term loans from banks may have their repayment extended by six months, Chiu said. All these measures are short-term solutions to boost investors’ sentiment and their impact is very much limited, stock market analysts said. A leading analyst said investors are waiting to see if the Central Bank would cut interest rates again. “That’s the action the market now wants, not the empty promises by the government,” he added.