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May 29, 2017

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Consumer confidence waning: Cathay Financial

TAIPEI, Taiwan -- A poll published by Cathay Financial Holdings (國泰金控) yesterday found that as of May confidence is waning among consumers, with many key indicators turning negative amid growing uncertainty.

According to the company's economics research division, confidence is waning among the Taiwan public due to rising uncertainties over recent hot issues including the halted construction of the Fourth Nuclear Power Plant, ongoing tax reforms and anticipated inflation and rising cost of goods. Consequently, the index measuring sentiment on anticipated inflation rose to 86.2, with economic confidence among the public dwindling to minus 11.

On the local market, Cathay Financial economists remarked that despite a firm hold at above the 8,800-point benchmark, the public is growing more averse to risk, with the index on risk preference declining to minus 9, adding that the index measuring investors' confidence has dwindled to negative 4.2. Cathay Financial economists attributed growing misgivings in the market, and concerns over an anticipated surge in volatility to a number developments that emerged in late April, including suspected market manipulation by foreign institutional short-sellers to allegedly influence the share price of Asia Plastic Recycle (F-再生), and the government's raising of the business tax on financial services from 2 percent to 5 percent. As a result Taiwan's investing public has been observed adjusting portfolio allocations to brace against rising uncertainty. Incidentally, the poll found that only 20.5 percent of the investing public explicitly stated that they do not intend to hold their shares past this year's dividend payout date, with 49 percent indicating a low likelihood. A majority of investors (55.2 percent) stated that they will not sell shareholdings to avoid the tax obligations on dividend payouts.

In addition, economists noted that the government's efforts in suppressing rampantly surging home prices have begun to take effect, following the Ministry of Finance's move to raise the tax on unoccupied non-primary residence housing properties from the current range between 1.2 and 2 percent to 1.5 to 3.6 percent. As a result, Cathay Financial economists stated that the index measuring the confidence of home buyers declined this month following posting consecutive gains for the three past months, while the confidence for home sellers this month saw similar gains over the period.

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