Taiwanese investor sentiment has plummeted over the past two months, as a result of a lackluster stock market performance and rising inflationary pressure, a poll reported yesterday.
Nearly 75 percent of investors suffered losses in the market after the new government took office, with the optimum index dropping to minus 61.31 points this month from 102.37 in April, the largest decline since December 2003, when the bi-monthly survey by the Chinese-language weekly Business Today magazine and Shih Hsin University was first conducted.
The optimum index is a reading used to gauge market sentiment. A positive figure indicates the level of optimism, whereas a negative figure indicates the level of pessimism.
“The huge decline in investor confidence this month is mainly as a result of the fact that April’s index was too high [the second-highest level on record]. Because investors’ expectations [of the new government] were too high, it also led to greater disappointment,” Kuo Nai-fong (郭迺鋒), an associate professor and chair of the finance department at Shih Hsin University, said at a press conference yesterday.
When asked whether investors would be able to reach their investment goals within the next three months, the level of optimism plunged to minus 55.5 points this month from 70.7 in April [the highest level on record], indicating that investors turned pessimistic about their investments in the short term, the survey showed.
In regard to the impact of commodity prices on the stock market over the next three months, the optimism level dropped to the lowest level of minus 76.1 points this month, from minus 10.2 in April, which implies that investors generally believe that commodity prices will continue to rise.
“The rise in commodity prices is a given fact, but the question remains whether the government can effectively eliminate the public’s anticipation of rising commodity prices,” Kuo said, adding that he expected the central bank to raise its benchmark interest rate by another 0.25 percentage points today to combat inflationary pressure.
Over the next two months, 44.93 percent of survey respondents said inflation would become the main factor affecting the local bourse, followed by movement of foreign capital and weakening US economic fundamentals, at 16.68 percent and 9.1 percent respectively, the survey showed.
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