Taiwan Stocks See Largest Intraday Plunge in History
Taiwan stocks at one point plunged more than 3,700 points intraday last Friday, marking the largest intraday drop in history, and fell below the 38,000-point mark. The decline narrowed to 1,873 points at the close, still below the 40,000-point mark, falling 5,510 points for the week, down 12.2%, to close at 39,701 points. The National Stabilization Fund announced it will launch its stabilization operation on the 9th. Investor Guhai Laoniu believes this entry is really early, and posted on his Facebook fan page to remind investors of ten common myths.
500 Billion Fund Structure Revealed
The National Stabilization Fund, fully named the National Financial Stabilization Fund, was established in 2000 to respond to major domestic and international events, to maintain stability in capital markets and other financial markets and ensure national security. Currently available funds total NT$5,000 billion, of which NT$2,000 billion is borrowed from financial institutions using public and private enterprise stocks held by the national treasury, such as TSMC, Chunghwa Telecom and others, as collateral, while another NT$3,000 billion comes from investable funds including postal savings, postal life insurance reserves, labor insurance funds, labor pension funds, and civil servant retirement and survivor relief funds.
Only 8 Stocks Bought, TSMC as Core Holding
Guhai Laoniu points out that many investors think the National Stabilization Fund is here to rescue them from losses, but its function is to stabilize market confidence and stop the bleeding, not to help investors break even. The first 8 operations earned a cumulative 66.1 billion, with the 9th operation netting 9.9 billion, a return of about 81%. Its targets are commonly large-cap stocks; in the 9th operation it bought only 8 stocks, with TSMC as the core holding, but Fubon Financial and Formosa Plastics were also on the list, so it did not only rescue tech stocks. The stabilization does not deploy the full 500 billion at once; in the 2020 pandemic operation only 756 million was used. The funds are positioned only as a catalyst and are usually not fully deployed.
Entry Does Not Mean Bottom, Exit Did Not Trigger Crash
Entry does not equal a bottom; after entries in 2000 and 2008, Taiwan stocks continued to fall. Holdings details are not disclosed immediately and are only revealed after the stabilization operation ends, making it difficult to follow trades in real time. As for whether the market will crash after exit, in the quarter when shares were disposed after the 9th operation, Taiwan stocks instead rose 4,890 points. Guhai Laoniu believes the real strength of the National Stabilization Fund lies not in stock picking, but in daring to buy when the market panics and holding on. Investing always involves risks, with both gains and losses, and investors should learn correct investment concepts to reduce the risk of losses.