Stabilization fund ready to shore up equity market: MOF

Finance Minister Su Jain-rong (CNA file photo)

TAIPEI (CNA) — Finance Minister Su Jain-rong (蘇建榮) on Friday said the National Financial Stabilization Fund is ready to lend support to the local equity market and its committee could meet at anytime if necessary, amid global volatility spurred by escalating fears over the novel coronavirus disease COVID-19 worldwide.

At a news conference held at around 8:15 a.m., 45 minutes before the local equity market opened, Su urged investors to remain confident in Taiwan’s economic fundamentals, saying the Ministry of Finance, the central bank and the Financial Supervisory Commission will come up with measures to stabilize the stock market.

Su made the comments as concerns over the spread of COVID-19 intensfied, sending ripples through global financial markets.

Overnight, the Dow Jones Industrial Average plunged 2,352 points or almost 10 percent, the largest single session drop since Oct. 19, 1987, when the index shed 22.6 percent amid a global financial crisis, while the broader S&P 500 index and tech-heavy Nasdaq index also dropped more than 9 percent even though the U.S. Federal Reserve took the unusual step of injecting funds into the market.

Despite Su’s remarks, the weighted index on the Taiwan Stock Exchange or the Taiex still opened down 331.29 points at 10,091.03 and the weakness continued on panic-led selling across the board.

Su said the stabilization fund is watching the local equity market closely and its committee could meet anytime, if necessary, and jump into the market to counter the impact of global volatility.

The NT$500 billion stabilization fund was set up in 2000 by the government to serve as a buffer against unexpected external factors disrupting the local bourse.

The fund intervenes in the market when it receives authorization from the fund committee, which is currently managed by Vice Finance Minister Juan Ching-hwa (阮清華), who is executive secretary of the fund.

However, Su said with the virus, originally from the Chinese city of Wuhan, spreading worldwide, it is no surprise that the global economy faces severe challenges with plunging equity markets around the world.

In addition to the dive on the U.S. markets, the equity markets in France, Germany and the United Kingdom also tumbled 12.28 percent, 12.24 percent and 10.87 percent, respectively, Thursday.

Compared with the markets in the U.S. and Europe, Juan said, Taiwanese equities appear resilient despite the ongoing scare over the virus. He cited data from Feb. 24 to March 12, showing that the Taiex fell 10.82 percent, while the Dow dropped 26.88 percent, and the markets in France, Germany and the U.K. shed 32.93 percent, 32.54 percent and 29.26 percent, respectively.

The relatively small drop in Taiwan came as the country has executed efficient and effective measures to contain the spread of the virus, Juan said, adding that healthy economic fundamentals and attractive dividend yields in the equity market have enabled Taiwanese stocks to fend off unfavorable external factors to some extent.

“It is unnecessary for investors to panic,” Juan said, “They should have faith in the local equity market.”