(Bloomberg) — Stocks in Taiwan rallied after authorities pledged to prop up domestic shares for the first time since the early days of the pandemic in 2020.
The benchmark Taiwan Stock Exchange Weighted Index closed 2.7% higher on Wednesday, the biggest jump in nearly four months.
The National Financial Stabilization Fund received authorization to support local equities after its committee concluded an extraordinary meeting a day earlier, according to the Ministry of Finance.
The intervention underscores the many challenges confronting Taiwan’s tech-reliant market, which has been buffeted by a weaker outlook for the sector and rising fears of a US recession.
Shares fell into a bear market earlier this month as foreign selling exerted pressure. Global funds have withdrawn nearly $35 billion since the start of the year.
“The news that the stabilization fund will support the market should be able to stop stocks from declining further and boost investor confidence in the short-term,” said Harris Liao, chief investment officer at Concord Securities Co.
“But whether Taiwan stocks can bottom out depends on the stabilization of US 10-year government bond, US inflation number and US tech stocks. There are still many uncertainties.”
All but one of the 28 sub-gauges of the benchmark stock index rose Wednesday.
Chip giant Taiwan Semiconductor Manufacturing Co., which accounts for more than a quarter of the index’s weighting, jumped 4.7%. The firm is expected to report results on Thursday.
The last time the stabilization fund stepped in to support the market was back in March 2020 when global markets reeled from the then nascent Covid-19 outbreak.
President Futures Co. said authorities had spent about NT$760 million ($25 million) through October that year to put a floor under prices.
Tuesday’s decision will be the eighth time authorities have chosen to step into the market since the stabilization fund was established in 2000.
Historically, the support has generally heralded rallies for weeks and sometimes even months after announcements. On Monday, the fund had originally decided not to intervene, which triggered a selloff.
Some analysts remain cautious about the outlook, however.
Credit Suisse Group AG has lowered its year-end target for Taiwan’s equity benchmark to 15,000 from 17,500, citing further risks of earnings downgrades.
“There are still negatives to the global stock markets, such as US inflation and US Fed rate hike, so the risks remain,” said Boryi Chien, an assistant vice president at Cathay Securities Corp.
“In the short-term, the fund’s support should boost the market and attract buyers. In the mid to long term, the effects remain to be seen.”
(Updates numbers to show market close in second and fourth paragraph; An earlier version corrected the number of components in the fifth paragraph)
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