Confidence in local economy weakens in October

Taipei, Oct. 22 (CNA) – Investor confidence in the local economy weakened in October as domestically transmitted COVID-19 cases continued to rise, according to Cathay Financial Holding Co.

Alongside the pandemic, global interest rate hikes and a decline in leading indicators released by the National Development Council (NDC), which pointed to a downtrend for the 10th straight month in August, also undermined investor sentiment, Cathay Financial said. The NDC is scheduled to release data for October next week.

Citing its Oct. 1-7 survey, Cathay Financial, one of Taiwan’s leading financial holding companies, found that 20.6 percent of respondents believed the local economy would improve in the next six months, while 57 .8 percent said the economy will deteriorate.

The numbers translate to a six-month economic optimism index of minus 37.2 in October, a more bearish outlook than the minus 30.1 recorded in September.

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Business optimism over current economic conditions also fell to minus 54.1 in October from minus 43.2 a month earlier, the survey said.

Amid the weakening sentiment, the indicator measuring interest in home sales fell to minus 13.4 in October from minus 12.8 in September, while the index measuring willingness to buy a home fell to minus 55.8 from minus 55.8 59.5, the lowest level in six years.

Cathay Financial said the local central bank’s continued rate hikes to combat inflation are hurting sentiment in the housing market, making both home buyers and sellers more cautious. Since March, the central bank has hiked interest rates by 50 basis points, including a 12.5 basis point hike at the end of September.

Rising interest rates are also eroding people’s willingness to buy big ticket items like cars, with the index falling to minus 4.7 in October from minus 3.3 in September, the survey showed.

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Cathay Financial said global stock price volatility amid aggressive rate hikes by the world’s major central banks, particularly the dovish Federal Reserve, has dampened stock investor sentiment, with the stock market optimism index falling to minus 33.8 from minus 18.8 in September fell in October, the lowest in more than two years.

In addition, the index that measures risk appetite in the stock market also fell to minus 10.7 from minus 1.4, Cathay Financial said.

In the October survey, 61.8 percent of respondents expected their wages to remain unchanged over the next six months, up 0.1 percentage point from September, while 20.3 percent expected their paychecks to shrink over the next six months, 1 .5 percentage points higher than in September.

Respondents in the October survey projected Taiwan’s economic growth at 2.65 percent in 2022, compared with 2.74 percent in a similar survey in September, with 70 percent saying they expect annual growth of over 2 percent.

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That was more cautious than the Directorate-General for 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 the local consumer price index (CPI) to grow 3.07 percent in 2022, unchanged from the September survey, while about 66 percent expected the CPI to exceed 3 percent.

The DGBAS has forecast inflation of 2.92 percent for 2022, above the 2 percent warning set by the central bank.

The survey collected 19,183 valid online questionnaires from customers of Cathay Life Insurance and Cathay United Bank, which are wholly owned by Cathay Financial.

(By Su Ssu-yun and Frances Huang)

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