Wed, Jun 28, 2017 - Page 12 News List

Confidence drops amid concerns of market correction

By Crystal Hsu  /  Staff reporter

The consumer confidence index fell 0.35 points month-on-month to 77.76 this month, as investors grew increasingly wary about a stock market correction after the TAIEX rose to a 27-year high, a National Central University survey showed yesterday.

The TAIEX has risen 13.6 percent this year to 10,512.06 yesterday, bolstered mainly by foreign fund inflows targeting local listed companies’ dividend payouts.

“That explains why the stock market rally has failed to produce a wealth effect among local investors, as evidenced by their conservative spending,” National Central University Research Center for Taiwan Economic Development director Dachrahn Wu (吳大任) told a news conference.

The stock investment sub-index shed 2.5 points month-on-month to 88.0, probably because the survey took place just after a fall on Wall Street, National Central University economics professor Yau Ruey (姚睿) said.

Despite the retreat, the sub-index still stood above 85 — a critical threshold for confidence — and the 10-year average of 72.6, meaning investors generally remain upbeat, Yau said.

An influx of foreign funds provided the local stock market with ample liquidity, even though the M2 monetary gauge — savings deposits, money market securities, mutual funds, other time deposits and M1B — outpaced M1B — cash and cash equivalents — last month, central bank Governor Perng Fai-nan (彭淮南) said last week.

A higher M2 than M1B is often interpreted as a downturn in investor sentiment, as investors prefer to park funds in time deposits to avoid losses due to stock market volatility.

While foreign funds help prop up the local stock market, they can also play havoc when foreign investors decide to take profits after receiving dividend payouts, Yau said.

The public was also less upbeat about the employment outlook, with the sub-index standing at 100.4 this month, down 1.3 points from last month, the report said.

Wu attributed the decline to the entry into the job market of graduates and part-time workers, but said the overall market looks healthy, thanks to a stable domestic economy.

The public also expects consumer prices to go up, with the inflation expectation gauge gaining 1.45 points to 45.45 this month, the report said.

The sub-index on durable goods consumption picked up 0.7 points month-on-month to 84.85, while the sub-index on the economic outlook edged up 0.05 points to 71.6, both increases too mild to be significant, National Central University economics professor Chu Yun-peng (朱雲鵬) said.

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