New tax bursts Taiwan bubble

Press, 30 September 1988, Page 18

New tax bursts Taiwan bubble

NZPA-Reuter ’ Taipei Panic selling sent Taiwan share prices plummeting yesterday after the Government announced a tax on stockmarket profits designed to cool Asia’s fastest growing bourse. Housewives, small businessmen, and office workers streamed into brokerage houses to sell shares, pushing the weighted index down 175.96 points to end at 8613.82. Finance Minister, Ms Shirley Kuo, struck fear into investors after the market closed on Saturday for the four-day Moon Festival holiday by announcing that profits on sales of shares exceeding sTai3 million ($NZ174,125) would be taxed starting January 1 next year. Although shares bought this year are exempt from the tax, the announcement was seen as a determined attempt by the Government to stabilise the market which has climbed by almost 280 per cent since the start of the year, when other world sharemarkets have been in retreat. The market was saved from total rout by a regulation under which share prices can only move by a maximum of 3 per cent in each direction on any day. All but two of the 151 stock issues plummeted to their lower limits within minutes of the market opening. Turnover, which frequently reaches the equivalent of SUS2 billion (5NZ3.258), was only about SUSIOM. Brokers said they expected small investors would continue to sell but that institutions would start buying when prices became attractive, possibly at 7000 points. Stockmarket fever has gripped Taiwan since early this year when the index began to soar after several months of dull trading in the wake of October’s world-wide crash.

Taxi drivers, housewives, and even Buddhist monks have jammed brokerages, jumping in and out of the market looking for a quick killing. Market capitalisation is almost SUSISOB, the highest in Asia after Japan.