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Taiwan’s Cabinet Studying Measures to Bolster Stock Market

Taiwan is studying measures to bolster stocks and plans to unveil a proposal in a month, according to Cabinet spokeswoman Cheng Li-wun.

Premier Sean Chen has asked Minister Without Portfolio Kuan Chung-ming to prepare the proposal amid concerns over the U.S. budget and the impact of slumping stocks on the economy, Cheng said in a telephone interview today after markets closed.

The government is moving to boost confidence after the Taiex index sank to a four-month low on Nov. 21 as the island’s exports contracted. Banks that are partially owned by the government and state-controlled funds should buy local stocks at lows, the Central News Agency cited Finance Minister Chang Sheng-ford as saying yesterday. The Taiex surged 3.1 percent today, the most in 11 months, as foreign investors bought the most equities in 10 weeks.

“There’s pressure on them to take these measures,” Peter Kurz, an analyst at Citigroup Inc, said by phone today from Taipei. “One shouldn’t look at government intention, but rather the action policy themselves. Just because the government wants the market to go higher, doesn’t necessarily mean that it will.” His team was ranked first for Taiwanese research by Institutional Investor this year.

The Taiex has fallen 5 percent this quarter, making it the third worst-performing Asian index after Mongolia and Sri Lanka, data compiled by Bloomberg show. The Taiex’s valuation fell yesterday to 17 times estimated profit, a 24 percent premium over the MSCI Asia Pacific Index, which is the cheapest level in five months, the data show.

Declining Exports

Stocks have slumped on concern the global slowdown will hurt the island’s exports of mobile-phone handsets and computers. Overseas shipments unexpectedly fell 1.9 percent in October from a year earlier, the eight monthly drop this year.

The island’s third-quarter gross domestic product expanded 0.98 from the previous year, the statistics bureau said today in Taipei. The median in a Bloomberg News survey of economists was 1 percent.

Taiex trading volumes today were 73 percent higher than the 30-day average after the finance minister’s comments, while the gauge’s 30-day volatility rose to 14.7, the highest level since Aug. 22, data compiled by Bloomberg show.

Overseas investors bought $426.6 million more Taiwanese shares than they sold today, the biggest net purchases since Sept. 14, according to stock exchange data.

The National Stabilization Fund, created in March 2000 to provide support when markets are threatened by non-economic factors, isn’t intervening in the market at this stage, Deputy Finance Minister Tseng Ming-chung said by phone in Taipei today.

“The government often says a lot, but the eventual policy may be very minor,” Zhan Zu-guang, a fund manager from BlackRock Inc.’s Taiwan branch, said in a telephone interview from Taipei. “Still, it’s time to buy Taiwan stocks. Valuations are attractive and bad news has been priced in.”

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