Consumer confidence falls despite strong equity market


CNA

TAIPEI, Taiwan — Although the local equity market has made a strong showing in recent sessions, the latest consumer confidence index (CCI) fell, most notably the sub-index for timing to buy equities, which increases caution over rising share prices, a survey showed on Tuesday.

According to the survey, conducted by National Central University (NCU), the CCI for June fell 0.35 points from a month earlier to 77.76, with the sub-index for timing to enter the equity market over the next six months standing at 88.00, down 2.50 points from a month earlier, the steepest fall in the CCI’s six sub-indexes.

The six sub-indexes reflect how much confidence people have in consumer prices, employment, family finances, local economic climate, stock market and the possible purchase of durable goods over the next six months.

Dachrahn Wu (吳大任), director of the NCU’s Research Center for Taiwan Economic Development, said that the fall in the sub-index focused on the equity market reflected fears over possible downside risks after equities rose significantly in recent sessions.

The survey was conducted from June 19-23, according to NCU.

The weighted index on the Taiwan Stock Exchanged passed the 10,000-point mark on May 11 for the first time in 17 years and has continued to rise, hitting a 27-year high of 10,377.70 on June 23 and a new high of 10,513.96 on June 26, before falling slightly to close at 10,512.06 on Tuesday.

Yao Jui (姚睿), an economist with NCU, said that the latest survey was conducted a week after Wall Street suffered volatility, which made many local investors wary of the outlook for the local equity market.

She said that since foreign institutional investors currently account for about 40 percent of total market capitalization, up 31 percent from 2010, wealth effects resulting from share price gains enjoyed by local equity investors have been capped.

In addition to the sub-index for the stock market, the sub-indexes for employment and family finances also fell 1.30 and 0.50 from May, respectively, to 100.40 and 76.25 in June, the survey indicated.

However, the sub-indexes for consumer prices, timing of durable goods purchases and local economic climate moved higher in June, up 1.45, 0.70 and 0.05 from May to 45.45, 84.85 and 71.60, the survey showed.

According to NCU, a sub-index score of between 0 and 100 indicates pessimism, while a score of between 100 and 200 indicates optimism. Therefore, the results show that of the six sub-indexes, only responses to the employment indicated optimism over the next six months.

The survey collected 2,416 valid questionnaires, had a confidence level of 95 percent and a margin of error of plus or minus 2.0 percentage points, NCU said.