Crisis causes investors to panic Fleeing: China's has sparked a stampede on Taiwan's stock market, but there may be a silver lining to Beijing's saber-rattling. The Taiwan government is taking uncharacteristic measures to calm investors' nerves.

March 12, 1996|By Ian Johnson | Ian Johnson,SUN FOREIGN STAFF

TAIPEI, Taiwan -- Yu Hui-chen never considered herself a sophisticated investor, so when she heard that more military exercises were taking place and that U.S. aircraft carriers were on their way to Taiwan, she did the first thing any self-respecting Taiwanese investor would do: She panicked and dumped every stock she owned.

"I know it wasn't smart, but it's terrifying," Mrs. Yu said, her face flush with relief after completing her sale of $53,000 worth of stocks. "I feel so much better now."

Mrs. Yu wasn't alone.

Taiwan's stock market fell 2 percent yesterday. Since China started the first round of military exercises last July, it has dropped 30 percent, making it one of the world's worst-performing markets.

Faced with investor dissatisfaction before next week's presidential election, the government recently implemented a $7 billion stock stabilization program, which allows the government buy stocks and pushes large investors to follow suit.

"In theory it's not a good idea for the government to get in the business of influencing stock prices," said Ting Ke-hua, vice director of the Securities Management Committee, which oversees the stock market. "But when such external pressures take place, it is justified to prevent the situation from spiraling out of control."

The tensions between Taiwan and China may actually have the long-term effect of forcing the government to take a more laissez-faire approach.

Long a financial backwater because of its restrictive banking and investment laws, Taipei liberalized investing laws last week along with the establishment of the stabilization fund. Now, foreign investors will be allowed to invest up to $5 million directly in the market.

But for almost all the hundred or so people milling around the King Hoe Securities lobby, which features dozens of monitors flashing quotes and news, the only things that counted yesterday were missiles, ships and planes.

"This is just a typical case of Taiwanese nerves," said investor Huang Tze-hsuan. "The economy here is basically sound. The external problems are temporary so I'm buying. Sooner or later it's got to go up."

Pub Date: 3/12/96

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