By Weiyi Lim
April 29 (Bloomberg) -- Taiwan’s Finance Minister Lee Sush- der said he may order its state-controlled funds to buy stocks in support of the market as the swine flu outbreak worsens.
“We are monitoring the situation now and will enter the market if there’s a need,” Lee said in a telephone interview, adding that any use of fund will need the approval from a steering committee of government officials.
Taiwan’s Taiex index retreated 4.8 percent in the previous two days, more than 4.1 percent decline in Mexico, the epicenter of the swine flu outbreak. The government controls the National Stabilization Fund, created in 2000 with NT$500 billion ($15 billion), and four other investment vehicles to buy stocks.
“If the swine flu scare worsens and they enter into the market, it will help to narrow losses,” said Parker Wu, a fund manager at the Agriculture Bank of Taiwan, who helps oversee the equivalent of $44 million, said by phone today. “Last year, they were effective in reducing market losses during the Lehman crisis, so it shows they have the capability to do so.”
The Taiwanese government used the funds in September, instructing them to buy shares after a 9 percent slump following Lehman Brothers Holdings Inc.’s bankruptcy filing.
The Taiex added 0.3 percent to 5,614.06 at the close today, the first gain in three days.
‘Bullets’
“If the market really falls when the swine flu worsens, they may not have enough bullets to save the market,” said Tom Tang, assistant vice president at Masterlink Investment Advisory, a Taipei-based brokerage. “They have used up a lot of funds at the end of last year to boost the market.”
Seven countries have confirmed swine flu, including the U.K., Israel, Canada, New Zealand and Spain, laying the seeds for a possible global pandemic, according to the World Health Organization. WHO had acknowledged the growing threat of the swine flu, raising its global pandemic alert, saying the disease is no longer containable.
Taiwan’s shares gained earlier this year ahead of plans to improve ties with China as both agreed to open their financial services industries and double weekly flights after talks over the weekend.
The warming relationship is also spurring optimism the island will profit from increased trade, leading Goldman Sachs Group Inc. to upgrade Taiwan’s growth forecast and JPMorgan Chase & Co. to raise the Taiex’s target.
Goldman Sachs boosted its 2010 growth forecast for the island to 3.5 percent from 2.5 percent, economist Enoch Fung wrote in a note yesterday. The Taiex may rise 40 percent to 8,000 from yesterday through the end of the year, JPMorgan analysts including Nick Lai said yesterday.
To contact the reporter on this story: Weiyi Lim in Taipei at wlim26@bloomberg.net
Last Updated: April 29, 2009 03:19 EDT
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