Share drop limit to briefly narrow

The decision was made yesterday afternoon during a meeting of major economic and financial officials, chaired by Premier Liu Chao-shiuan, to seek ways to prevent major fluctuations of share prices. Participants in the meeting were Chairman Gordon Chen of Supervisory Commission (FSC), Finance Minister Lee Su-der, Deputy Governor Yang Chin-long of the Central Bank of the Republic of China, Chairman Chen Tian-jih of the Council for Economic Planning and Development, and Economics Minister Yiin Chii-ming.

Under the decision, local shares, which normally are not allowed to rise or fall by more than 7 percent in any trading session, will now be limited to declines of 3.5 percent, effective from Oct. 13 to Oct. 17 (this Monday through Friday), announced Financial Supervisory Commission Chairman Gordon Chen. The daily 7 percent limit up will remain unchanged.

Meanwhile, the existing ban on short-selling, which will expire on Oct. 13, will be extended through the end of this year.

In addition, the government will also move to coordinate with the National Stabilization Fund to authorize investment in the domestic stock market.

"The measures are aimed to cushion the impacts from the nosedives of the Dow Jones Industrial Average in the U.S. and the bourses in Asia last Friday," the FSC's Chen said at a press conference Sunday evening. "We wanted to give investors time to observe market conditions."

Chen said that the measure would be implemented roughly for one week, but with the uncertainty that remains in financial markets around the world, they would not specify a firm timetable for the plan.

The government will not, however, halt trading during this turbulent period, Chen continued. "We are not considering shutting down the market because our bourse's fundamentals are still strong."

At the press conference, Finance Minister Lee Su-der said that the government will ask the management of the National Stabilization Fund continue to intervene in the market, probably for one more month, to keep it from falling too precipitously.

The fund, consisting of four funds held by the government, began intervening when Taiwan's market plunged in September and was supposed to pull back from the market by Oct. 17 when its one-month authorization was to expire.

The local market got a respite Friday when it was closed for the country's National Day, as other Asian markets suffered steep losses. Japan's benchmark Nikkei Index fell by 9.62 percent while Hong Kong's Hang Seng Index lost 7.19 percent.

The Dow Jones later opened down 600 points Friday before recovering to close 128 points, or 1.5 percent, lower.

The finance ministers of the Group of 7 nations issued a five-point plan Friday, designed to reverse the credit crisis that has engulfed global financial institutions and sent markets tumbling.

It was unclear if the plan's commitment to protect major banks, revive the mortgage financing market and get credit flowing more freely would calm investor nerves when markets open in Asia Monday.

Government officials feared that the global panic would continue to hit the local bourse and cause the weighted share price index to fall under 5,000 for the first time since July 2003, when Taiwan was emerging from an economic slowdown caused by the SARS crisis.

Taiwan's TAIEX index recorded its highest close for the year of 9,295 on May 19, the day before President Ma Ying-jeou was inaugurated, but has ever since plunged by more than 40 percent since then.

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