More steps taken to stem share slide
Written by changthai11 on Sunday, October 12th, 2008
More steps taken to stem share slide
The China Post news staff
TAIPEI, Taiwan –– Senior officials continued working over the weekend on adopting new measures to stem a possible continuing slide of Taiwan share prices.
After the weighted share price index fell through 5,500 points early last week, the government was expected to draw up a new defense line at 5,000 points.
Stocks continued their tumble, closing at 5,130 points Thursday and escaping another sliding session the following day, mainly because the market was closed for Taiwan’s National Day holiday.
Although officials had repeatedly called for calm an confidence, they remained edgy after the Dow Jones industrial average slumped to under 9,000 points during the week and closed at 8,451 before moving as low as 7,882 on the closing session of the week.
An estimated US$2 trillion evaporated in what investors described as “a worldwide market crash” on international stock markets in recent weeks, triggered by a deepening crisis of financial institutions in the U.S. and European nations.
Securities analysts said the latest market crash caught even the most experienced and savvy investors by surprise.
Officials here have become increasingly cautious after the market continued moving against them, with many openly asserting weeks earlier that the “investment value” for Taiwan shares already emerged.
Analysts said officials should not be blamed as even the US$700 billion financial rescue package adopted by the U.S. and the repeated call for confidence by President George W. Bush was ignored by investors.
They commended the steps already taken by the government here to cope with the unprecedented market developments. But more has to be done to shore up investor confidence, they asserted.
After Premier Liu Chao-shiuan announced the 100-percent guarantee for all deposits at financial institutions, as the Central Bank of the Republic of China (CBC) announced an emergency measure to reduce the nation’s key interest rate by quarter of a percentage point.
The government is almost certain to extend the decree of prohibiting short sales on the stock market after the current temporary ban expires Tuesday.
The Finance Committee in the Legislative Yuan gave preliminary clearance to rule revisions to halve the securities trading tax rate to 0.3 percent from the existing 0.6 percent for the period of six months as proposed by the Cabinet.
But lawmakers of the ruling Kuomintang have to overcome the strong opposition from their colleagues of the Democratic Progressive Party.
The effect of the bill to help revive sagging stock transactions will be muted if the legislative procedure drags on for too long, according to analysts.
There are still other short-term and provisional measures in the government’s arsenal, including halving the daily rising and falling limit to 3.5 percent for individual shares from the present range of 7 percent.
The government may consider lowering the borrowing costs for investors and a shaving in the service charge on share transactions, some of the analysts said.
Some of them suggested that the government should increasingly use the investment funds under its control to support the market.
The capital infusion should be strategically focused on the blue chips that are regularly seen as the bellwethers of the market trends, they said.
Officials declined to reveal what major actions they plan to take, saying all possible options are presently under consideration.
The reactions of the international financial markets to the latest concerted measures adopted by the finance chiefs of the major industrialized nations as well as officials from the World Bank and the International Monetary Fund (IMF) at the weekend meeting held in Washington will be closely monitored when the market opens tomorrow, they said.
Like officials in other nations, they said confidence remains a key factor.
CBC Governor Perng Fai-nan stressed that Taiwan economy only encounters the problem of “slowdown, but no recession.”
Finance Supervisory Commission Chairman Chen Shu urged investors in Taiwan not to bungle their investment strategies under irrational decisions.
Speaking on the National Day, President Ma Ying-jeou told the public that he was confident the nation would weather the global financial crisis.
In spite of officials’ rhetoric, analysts said the coming week will be another major test for officials and investors as the local stock market will be influenced by the performance of the international financial market.
