National Security Fund to Sell Its Share Holdings

Taipei, May 18, 2006 (CENS)--After maintaining low profile for quite a while, the National Security Fund, under the Executive Yuan, recently signed a contract for discretionary-account operation with the Central Trust of China (CTC), authorizing the latter to sell the balance of its share holdings, mostly blue chips and worth some NT$60 billion, at proper time.

An official in charge at the Executive Yuan pointed out that according to the resolution of the National Security Fund committee, CTC must comply with the specific amount and price range set by the committee when selling the fund' s share holdings. Plus the low-profile operation of the fund, the projected share sales will not produce any impact on the stock market, according to the official.

In a regular meeting in April, the National Security Fund committee resolved to sell the balance of its share holdings, since the stock price index had risen above the costs of the fund' s share holdings. The fund signed the contract with CTC two weeks ago, authorizing the latter to sell the share holdings on its behalf.

A fund committee member pointed out that with Taiex having risen to over 7,000 points, ''the fund can sell its share holdings now without incurring any loss.'' Due to the discretionary-account operation, there is no way for outsiders to know whether CTC has sold any of the shareholdings so far. The situation won' t be clear until mid-July after the publication of quarterly financial statements.

The last time when the National Security Fund sold its share holdings was in 2004, at a limited amount of only several billions of N.T. dollars. The year when the fund disposed of its share holdings at massive scale was in 2003, when it sold some NT$70 billion worth of shares, both in the domestic and overseas markets.

Since its establishment in 2000, the fund has stepped into the market to shore up the Taiex index in a number of major events, including the regime change following the presidential election in March 2000, the crisis involving the risk of the financial payment system in October 2000, soaring global crude-oil crisis triggered by Israel-Palestinian conflict, and the suspension of the construction of the fourth nuclear power plant. Accumulated amount of the purchase of securities by the fund tops NT$170 billion.

The last time when the fund came to the rescue of the market was during the period of March to May, 2004, in the wake of the shooting incident on the eve of the presidential election. Afterwards, the fund has remained dormant and as of the end of March this year, the cost of its shareholdings stood at NT$68.1 billion.

The National Security Fund once received reprimand from the Control Yuan for loss of NT$3.2 billion from purchase of some ''mine'' shares, including Pacific Electric Wire and Cable and Mosel Vitelic. Afterwards, the fund once publicly announced that its buying targets will focus on ETF50 and its constituent stocks. Therefore, the sales of the fund' s share holdings may produce greater influence on the constituent stocks.

After its establishment, the National Treasury once replenished NT$46.7 billion of fresh capital for the fund to cover its loss. During the rally of the Taiwanese stock market this year, prices of financial stocks enjoyed considerable growth, greatly boosting the value of the fund' s shareholdings, which contain a large amount of financial stocks. As a result, excluding the annual interest of NT$3 billion, the fund has started to make money.