Taiwan’s benchmark stock index rallied the most since December 2011 after the government said it would tap a financial stabilization fund for the first time in four years to spend as much as NT$500 billion ($15 billion) in equities.
The Taiex index extended gains after the afternoon announcement, rising 3.6 percent to 7,675.64 at the close. Taiwan Semiconductor Manufacturing Co., the world’s biggest contract chipmaker, jumped 7.4 percent. The National Financial Stabilization Fund authorized its fund managers to buy equities, with the timing of purchases subject to market conditions, Vice Premier Simon Chang said at a briefing following an emergency government meeting.
Taiwan’s government has accelerated measures to support stocks after the Taiex index entered a bear market last week and plunged as much as 7.5 percent on Monday. Besides arming the stabilization fund, officials said Tuesday they will relax rules on financial companies’ investments in shares.
“The government’s pledge to support the market and authorization for the national stabilization fund to buy stocks help market confidence,” said John Chiu, chief investment officer at Fuh Hwa Securities Investment Trust Co. in Taipei.
The measures are aimed at boosting investor sentiment, Vice Finance Minister Wu Tang-chieh said Tuesday. The last time the government tapped the stabilization fund was in 2011, following the death of North Korean leader Kim Jong-Il. On that occasion, the government stayed in the market through the end of 2012.
The Taiex has tumbled 23 percent since hitting a 15-year high on April 27, sending valuations to the lowest levels since 2008, amid speculation China’s economic slowdown and currency devaluation will curb demand for the island’s technology products.
While Taiwan stocks rebounded Tuesday, China’s benchmark Shanghai Composite Index slumped 7.6 percent, extending its steepest rout since 2007 on concern the government is paring back support for the market. The China Securities Regulatory Commission made no attempt to reassure investors after Monday’s plunge, unlike a month earlier when officials issued two statements shortly after an 8.5 percent drop.
(Earlier versions misidentified the country of Kim and misspelled the name of the vice premier.)