As the benchmark stock index fell below the psychological 7,000-point barrier to hit a 20-month low last week, President Ma Ying-jeou (馬英九) and other government officials aggressively offered rosy outlooks and economic plans in an attempt to restore market confidence.
They said the nation’s economic fundamentals remained sound and that the stock market should rebound once global oil prices fall and international financial markets stabilize.
The nation’s central bank even said on Friday it would provide sufficient liquidity to ensure that the stock market operates normally — a rare move for the monetary authority, as its main task is solving inflation, not saving the stock market.
Meanwhile, Ma said yesterday that the government had secured NT$1.08 trillion (US$35.55 billion) in domestic investment this year, and that the figure may amount to NT$4 trillon over the next three years.
Government officials seem to be struggling to convince investors that things are under control, or that they feel people’s pain amid rising inflationary pressures and bearish economic prospects.
Ironically, some remarks made over the past week seem to have produced the opposite effect, giving the impression that government officials worry more about how to boost public recognition of their competence than anything else.
Of those remarks, perhaps the most self-deceiving and naive were made by Vice Premier Paul Chiu (邱正雄) on Thursday, when he said that some foreign investors had expressed their confidence in Taiwan’s economy since the Chinese Nationalist Party (KMT) came to power in May.
Financial Supervisory Commission Chairman Gordon Chen (陳樹) also said on Wednesday that some foreign institutional investors were still very confident about Taiwan’s stock market, with a European fund revealing that investors in Hong Kong and Singapore were set to raise money to invest in Taiwanese equities.
But these pep talks were undercut by the fact that foreign investors have been saying one thing and doing another.
Taiwan Stock Exchange data show that foreign institutional investors sold a net NT$30.87 billion in local shares last week and have offloaded NT$65.96 billion in local shares so far this month. Moreover, since Ma’s inauguration on May 20, foreign investors have dumped a net NT$188.79 billion in local shares, an almost eight-fold increase on the net amount of NT$23.84 billion sold by their local counterparts over the same period of time.
Government officials also said last week they would set up better communication channels, arguing that their efforts to deal with economic problems had been hampered by difficulties in reaching out to the public.
The real problem, however, is that the Ma government is only paying lip service in its show of sympathy for the public while failing to put enough thought into how to deal with these problems.
Government officials have repeatedly said that the nation’s economic fundamentals are sound and that they genuinely believe the recent plunge is nothing more than a crisis of confidence.
But in the face of complaints from the industrial sector about higher taxes leading to capital outflows, worries from the retail sector over weak domestic consumption — prompting UK garment retailer Marks & Spencer to pull out from the Taiwanese market, as well as the latest credit crisis in the US, where IndyMac Bancorp was seized by federal regulators on Friday after a run by depositors — the government should perhaps ask itself if the problem is not just a lack of confidence, but also the onset of wider economic woes to come.
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