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From: C-ap@clari.net (AP / ANNIE HUANG, Associated Press Writer)
Newsgroups: clari.world.asia.taiwan,clari.world.asia+oceania
Subject: Financial Turmoil Hits Taiwan
Keywords: Asia
Organization: Copyright 1999 by The Associated Press (via ClariNet)
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Date: Thu, 11 Feb 1999 21:21:47 PST
Expires: Thu, 25 Feb 1999 21:20:18 PST
ACategory: financial
Slugword: Taiwan-Financial-Woes
Threadword: taiwan
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	TAIPEI, Taiwan (AP) -- Taiwan is suffering its most severe  
financial turmoil in years, with share prices plunging and 
companies failing, but economists say they see no reason to panic. 
	The government is scrambling to control the damage, but experts  
say that with only modest official measures, such as stricter rules 
to prevent improper lending and excessive corporate stock 
investment, Taiwan's relatively healthy financial system can guide 
the island through the mess. 
	``We do have problems and we can expect more corporate troubles  
to surface,'' said Wu Hui-lin an economist at the Chunghwa 
Institute of Economic Research on Thursday. ``But Taiwan's free 
market system will prevent the crisis from getting out of hand.'' 
	Taiwan has suffered less damage than many of its neighbors hit  
by the Asian economic crisis, though its economy has been slowing 
and many problems have started to emerge. 
	In the past few months, some banks were found to have improperly  
funneled funds to affiliated conglomerates that later got into 
trouble. Other companies saw their debts soar after borrowing money 
to buy stocks that soon fell in value. 
	Some healthy banks suffered losses in the stock market as they  
jointly set up a $8.7 million stock stabilization fund in November 
-- following a request from the government that they buy shares to 
prop up prices -- only to see shares shed nearly 15 percent since. 
	Vice Finance Minister Yen Ching-chang dismissed talks of a  
financial crisis breaking out in Taiwan, saying the economy is 
basically sound despite falling exports in the wake of the regional 
problems. 
	Troubled companies only account for 2.5 percent of the stock  
market capitalization, Yen has said. But authorities have taken 10 
firms out of the stock market to prevent their plunging shares from 
further shaking investor confidence. 
	Economists say most banks can stand firm, and the turmoil should  
bottom out in a year or so if the government keeps its hands off of 
the market and lets prices fall. 
	Unlike the turmoil that has embroiled its Asian neighbors, many  
of which are laden with foreign debt, Taiwan's troubles arose from 
aggressive bank lending backed by massive domestic savings, which 
fueled a property and stock market boom. 
	But the speculative bubble finally burst and credit dried up.  
	Panic-selling was triggered last week when a top politician and  
businessman bounced checks of $3.7 million. 
	The case stunned the public as it showed cracks in a once  
formidable network of business and politics. With cozy ties to top 
politicians, many business groups have gained lucrative contracts 
or obtained easy bank loans or financial aid from the rich 
businesses run by the ruling Nationalist Party to play the stock 
market. 
	Despite the problems, Wu said, Taiwan's banks are smaller than  
counterparts in Japan and South Korea, so it should be easier to 
control their troubles. Also, banks have become more prudent 
following the corporate defaults. 
	If the crisis forces Taiwan to reform its financial sector, it  
will have helped the island strengthen its democratic and free 
market systems, said Ho Chia-chu, an economics professor at Soochow 
University. 
-=-=-	 
                           AP NEWS
               The Associated Press News Service
             Copyright 1998 by The Associated Press
                      All Rights Reserved

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