Investor confidence in the local economy weakened in October as domestically transmitted COVID-19 cases continued to rise, according to Cathay Financial Holding Co.
In addition to the pandemic, investor sentiment was also eroded by increases in interest rates worldwide, as well as a fall in the leading indicators issued by the National Development Council (NDC), indicating a downtrend for the 10th straight month in August, Cathay Financial said. The NDC is scheduled to release data for October next week.
Citing its survey conducted from Oct. 1-7, Cathay Financial, one of the leading financial holding firms in Taiwan, noted that 20.6 percent of respondents believed the local economy would improve over the next six months, while 57.8 percent said the economy will deteriorate.
The figures translate into an economic optimism index for the next six months of minus 37.2 in October, a more pessimistic outlook than the minus 30.1 recorded in September.
Economic optimism over current economic conditions also fell from minus 43.2 a month earlier to minus 54.1 in October, the survey found.
Amid the more downbeat sentiment, the indicator assessing interest in selling homes fell from minus 12.8 in September to minus 13.4 in October, while the index evaluating willingness to buy a home fell from minus 55.8 to minus 59.5, the lowest in six years.
Cathay Financial said the local central bank’s continued rate increase to combat inflation is hurting sentiment in the property market, making both home buyers and sellers more cautious. Since March, the central bank has raised its key interest rates by 50 basis points, including a 12.5 basis point increase in late September.
Rising interest rates also undermine people’s willingness to buy big ticket items such as cars, with the index falling from minus 3.3 in September to minus 4.7 in October, the survey showed.
Cathay Financial said global share price volatility in the wake of aggressive rate hikes by the world’s major central banks, in particular the hawkish U.S. Federal Reserve, have dampened equity investor sentiment, with the stock market optimism index falling from minus 18.8 in September to minus 33.8 in October, the lowest for more than two years.
In addition, the index assessing appetite to take risks in the stock market also fell to from minus 1.4 to minus 10.7, Cathay Financial said.
In the October survey, 61.8 percent of respondents expected their wages to stay unchanged over the next six months, up 0.1 percentage points from September, while 20.3 percent expected their pay checks to shrink over the next six months, up 1.5 percentage points from September.
Respondents in the October survey pegged Taiwan’s 2022 economic growth at 2.65 percent, down from 2.74 percent in a similar survey in September, with 70 percent saying they expected annual growth to top 2 percent.
That was more cautious than the Directorate General of Budget, Accounting and Statistics (DGBAS), which forecast in late August that Taiwan’s economy will grow 3.76 percent in 2022.
In the October survey, respondents expected growth in the local consumer price index (CPI) to reach 3.07 percent in 2022, unchanged from the September poll, while about 66 percent expected the CPI to exceed 3 percent.
The DGBAS has forecast 2.92 percent inflation for 2022, above the 2 percent alert set by the central bank.
The survey collected 19,183 valid online questionnaires from clients of Cathay Life Insurance and Cathay United Bank, which are wholly owned by Cathay Financial.
Source: Focus Taiwan News Channel