Finance minister supports doubling stabilization fund

Detailed summary

Finance Minister Chuang Tsui-yun (莊翠雲) on Wednesday voiced support for a proposal to double the National Financial Stabilization Fund, saying a larger fund would give the government greater flexibility to intervene in the stock market amid growing political and economic volatility.

Taipei, Nov. 11 (CNA) Finance Minister Chuang Tsui-yun (莊翠雲) on Wednesday voiced support for a proposal to double the National Financial Stabilization Fund, saying a larger fund would give the government greater flexibility to intervene in the stock market amid growing political and economic volatility.

The NT$500 billion (US$15.24 billion) fund was established in 2000 to cushion Taiwan's stock market against unexpected external events.

Speaking at a legislative hearing, Chuang said the market capitalization of the local bourse stood at around NT$9.2 trillion when the fund was established in 2000 but had since increased more than 17-fold.

Foreign institutional investors now account for 46.78 percent of total market capitalization, compared with just 8.44 percent in 2000, Chuang said, adding that the fund's current size could face growing challenges in conducting market interventions.

Lawmakers have proposed amending the Statute for the Establishment and Administration of the National Financial Stabilization Fund to double its size to NT$1 trillion.

Under current law, the fund has two sources of financing. The first is borrowing from financial institutions, backed by shares held by the National Treasury in public and private enterprises, with a borrowing ceiling of NT$200 billion.

The second source consists of borrowing from the postal deposit system, the Postal Life Insurance Fund, the Labor Insurance Fund, the Labor Pension Fund and the Civil Servant Pension Fund, with a combined ceiling of NT$300 billion.

Chuang said the proposed increase in the borrowing ceiling from financial institutions to NT$700 billion would give the fund greater flexibility in its market intervention strategies.

Democratic Progressive Party lawmaker Kuo Kuo-wen (郭國文), who proposed the amendment, said heavy selling by foreign institutional investors could quickly deplete the fund.

Opening of the article, excerpted from Focus Taiwan (CNA). To read the rest, open the article on the publisher's site.