Minister supports doubling NSF

DUAL-FEED SYSTEM: Expanding the fund’s reserves would give it more ability to cushion the market from sharp shocks, said a DPP lawmaker, supported by the minister

Minister of Finance Chuang Tsui- yun (莊翠雲) yesterday voiced support for a proposal to double the National Stabilization Fund (NSF), 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$15.22 billion) fund was established in 2000 to cushion Taiwan’s stock market against unexpected external events.

Speaking at a meeting of the legislature’s Finance Committee, Chuang said the market capitalization of the local bourse stood at about NT$9.2 trillion when the fund was established in 2000, but had since increased substantially.

Minister of Finance Chuang Tsui-yun speaks at a meeting of the legislature’s Finance Committee in Taipei yesterday.

Photo: CNA

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

Lawmakers have proposed amending the Act for the Establishment and Administration of the National Stabilization Fund (國家金融安定基金設置及管理條例) to double its size to NT$1 trillion.

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 a 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 (DPP) Legislator Kuo Kuo-wen (郭國文), who proposed the amendment, said heavy selling by foreign institutional investors could quickly deplete the fund.

Foreign institutional investors sold a net NT$649.311 billion of shares on the Taiwan Stock Exchange’s main board from the beginning of this month through yesterday, exchange data showed.

Chuang said foreign institutional investors follow their own investment allocation strategies and move funds between markets. She added that investors should have confidence in Taiwan’s sound economic fundamentals.

On Friday, the fund’s management committee authorized a market intervention to ease volatility and prop up investor confidence after the TAIEX plunged 1,873.08 points, the fourth-largest single-session point decline on record, amid concerns over artificial intelligence development following the US midterm elections.

Since the announcement, the TAIEX has rebounded by 4,555 points, or 11.5 percent.

Asked by Chinese Nationalist Party (KMT) Legislator Yen Kuan-heng (顏寬恒) how long the fund would remain active in the market, Chuang said the NSF’s management committee would base the decision on market conditions.

The TAIEX yesterday ended up 1,545.23 points, or 3.62 percent, at the day’s high of 44,257.15, marking the sixth-largest single-session point gains, as Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) soared almost 5 percent.

“TSMC drove the TAIEX significantly higher as a hike in cash dividend payout and strong October sales data prompted investors to buy,” Mega International Investment Services Corp (兆豐國際投顧) analyst Alex Huang (黃國偉) said.

TSMC gained 4.81 percent to close at the day’s high of NT$2,395.