(本文翻譯自 陳冲 國安基金條例的閱讀測驗 2022-07-14)
On July 13th, the management committee of the National Financial Stabilization Fund has activated the fund to bolster the local stock market (called the 713 event). There are different interpretations, of course some conspiracy theories among them, and also thousands of messages in various media online. I don’t want to make any guesses here, just want to do some simple observations from the perspective of reading comprehension and some not distant experiences.
Before taking the reading comprehension test, let’s have a look at Taiwan’s stock market circumstance. On July 13th, the percentage of total market cap (TMC) relative to GDP is 204.99%, ranking among the highest in the world. Generally speaking, it is an indicator showing a country’s economic strength and the rationality of its capital market. I believe that the convener and the members of the fund would definitely take the indicator into account as usual before making decisions. Warren Buffett, often called the god of stock, once thought the reasonable range of the indicator falls in the area between 75% to 90%, and if it exceeds 120%, the stock market is significantly overvalued. The figure of the US at the same day shows 155.8%, which can already be considered a little bit too high. Later, some scholars have advocated that the denominator should be changed to GDP plus the total assets of the central bank for a more meticulous observation. The revised version of the US is about 114%. Taiwan, due to large amount of foreign investment and huge central bank assets, is 110.2%, although reduced a bit, still ranking top five of the world. In short, we are theoretically the least necessary region in the world to stabilize the stock market.
The Statute for the Establishment and Administration of the National Financial Stabilization Fund was enacted 22 years ago to institutionalize government's stock- market-stabilizing measures. On the one hand, to set standards for successors to follow. On the other hand, to prevent government from riding roughshod over people‘s rights. From past experiences, if conduct a reading test on the 713 event, four articles are compulsory questions, namely Article 1, 3, 5 and 8. Article 1 is about the legislative purpose. Before activating the fund, it’s a must to consider whether it fit the purpose: to preserve stability in capital markets and other financial markets and guarantee national stability. So, we must first think whether there’s instability in Taiwan’s capital market and financial market. According to the statement of the FSC in press conference, it seems that the answer is no. It’s simply a yes-no question and the answer is clear.
The answer to whether or not to activate the National Financial Stabilization Fund lies in Article 8. The legal imperative is “In the event of significant occurrences at home or abroad or large-scale movements of international capital having a substantial effect on public confidence and raising concerns about loss of order in capital markets or other financial markets or impairment of national stability”. These elements go hand in hand. There seems again a groundless decision as the statement on July 12th shows no related facts. So, why such a huge change overnight? This is the second question that needs to be answered.
The third question, who needs to answer the former two questions? According to Article 3, the Executive Yuan shall be the competent authority for the fund. And Article 5 stipulates that a National Stabilization Fund Management Committee shall be established to handle the following matters in connection with the fund and that the Vice President of the Executive Yuan shall concurrently serve as the chairman. Therefore, the examinee for the reading test should be the President and Vice President of the Executive Yuan, but this can also be a multiple-choice question.
The third question is too easy so there is a sub-question. Article 5 stipulates that in addition to those ex officio in the committee, there are also scholars, experts recommended by parties. Current four parties in the Legislative Yuan recommended total six members. I don’t know what these six members think about the above three questions. It is reported that each party has their own opinions regarding the event, so can we ask them for advice instead? All are indeed amusing questions, aren’t they?
Well, after analyzing these questions, people may be eager to know whether to activate the fund for stock market stabilization. To be or not to be, that is the question. See other countries and find the answers!