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Stabilization fund posts 2% return during presence in market

Stabilization fund posts 2% return during presence in market

Taipei, Oct. 13 (CNA) The National Financial Stabilization Fund posted an unrealized return of about 2 percent in the first month after it was authorized to enter Taiwan's equity markets on Aug. 25, according to the fund committee. The roughly 2 percent return, which has yet to be realized because the fund's holdings have yet to be sold, was made during the period of Aug. 25 to Sept. 30, the stabilization fund committee said after holding a review meeting Monday. During the same period, the weighted index on the Taiwan Stock Exchange rose 771 points, or 10.4 percent, indicating that the stabilization fund underperformed the broader market. Vice Finance Minister Wu Tang-chieh (???), who manages the stabilization fund, said the investments by the stabilization fund were aimed at shoring up investor confidence in the market rather than at making a profit. The NT$500 billion (US$15.38 billion) stabilization fund is a mechanism set up by the government to serve as a buffer against unexpected external factors that disrupt the bourse. The stabilization fund committee authorized the intervention of the fund in August when local shares were plummeting because of turmoil in global equity markets amid concerns over the world's major economies, in particular China. At the Monday meeting, the stabilization fund committee decided that the fund will maintain a presence in Taiwan's equity market into the first quarter of next year because of the potential for further volatility in global markets. China's economic growth remains sluggish, and the U.S. Federal Reserve is likely to kick off an interest rate hike cycle, which is expected to roil global equity markets, Wu said. He also pointed to continued weakness in the international crude oil market as a possible additional threat to the performance of Taiwan's stock market. As a result, Wu said the stabilization fund committee decided to allow the fund to stay in the market until global markets turn stable, though he stressed that the committee would prefer to see local stock market prices be determined by market forces without interruption from further global volatility. Wu said that under domestic regulations, the stabilization fund is allowed to sell stocks during its time in the market, but the find has not cut its holdings at all since Aug. 25. As of the end of September, the stabilization fund holds about NT$5.128 billion worth of local shares with an unrealized profit of about NT$104 million. The fund committee has scheduled another meeting for mid-January to review the fund performance. (By Chiu Po-sheng and Frances Huang)


Updated : 2021-09-24 03:00 GMT+08:00