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Local confidence in economy weakens: survey

TAIPEI--Taiwanese people's confidence in the domestic economy has shown signs of weakening, according to a survey released by Cathay Financial Holding Co.

The survey showed that 38.8 percent of the respondents thought the local economic fundamentals have turned slightly weaker or obviously worse, while only 28 percent said the economy has improved slightly or significantly.

About 36.9 percent of those polled said the local economy is expected to weaken slightly or significantly over the next six months, while only 25.8 percent expected it will improve in the next half year.

Cathay Financial said the weakening confidence in the local economy largely resulted from opposition against the controversial fourth nuclear power plant and the government's efforts to push for tax reform.

In addition, a hike in local consumer prices, in particular food costs, has hurt the public's sentiment, it said. In April, the local consumer price index rose 1.65 percent from a year earlier, with food prices up 5.04 percent. CPI growth in April hit a 14-month high.

As a result, the survey found that 87.4 percent of those polled thought consumer prices will rise over the next six months, while only 1.2 percent expected prices will fall during this period.

Cathay Financial said although the weighted index on the Taiwan Stock Exchange has performed well to close above the 8,800 point mark, volatility has increased since late April due to the disputes over the fourth nuclear power plant issue.

It said 32.3 percent of the people surveyed thought that the local bourse will fall over the next six months, while only 28.1 percent expected share prices will move up during this period.

An accusation by U.S.-based Glaucus Research Group which said the Taiwanese company Asia Plastic Recycling Holding Ltd. had inflated its financial records also had an impact on investor sentiment. However, the TWSE conducted an investigation and found no falsification in Asia Plastics's financial reports.

Despite this, the appetite for taking risks has been on the decline. The survey showed that 26.8 percent of the respondents said they will keep their bank deposits instead of moving funds to the local bourse, while only 17.8 percent said they will assign more funds from their deposit accounts to the equity market.

Meanwhile, as the government aims to raise a tax on homes owned not for self-dwelling purposes to 1.5 percent to 3.6 percent, from the current 1.2 percent to rein in home prices, the public's confidence in the local property market has been dampened.

The survey showed 78.5 percent of the respondents said now was not an appropriate time to purchase property, with only 10.1 percent saying it was a good time to buy a home.

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