Sentiment toward stock market falls to 20-month low
Results of a survey released Thursday show that market sentiment toward the local equity market fell to a new 20-month low as investors here took cues from recent volatility in local share prices.
In the survey, Cathay Financial Holding Co. ( ) said that 39.4 percent of the respondents said they expect share prices in the local market to fall over the next six months, while 23.4 percent anticipate that the stock index will rise over that period.
The results translate into an optimism index toward the local equity market of minus 16 in June, down 0.1 from the index recorded in May. The June figure was the lowest level since Octo- ber 2013, when the index stood at minus 17.2.
Cathay Financial said that market sentiment has been haunted by heavy losses on the local bourse in recent sessions, while some new trading measures have also prevented many retail investors from entering the trading floor before they can figure out the effects.
Starting from June 1, the daily upward and downward share price fluctuation limits have been raised to 10 percent from 7 percent. Also from the beginning of June, the amount of equity required for investors to maintain their margin trading accounts — known as the collateral maintenance ratio — has also been hiked from 120 percent to 130 percent of the amount borrowed on margin.
The weighted index on the Taiwan Stock Exchange briefly breached the 10,000 point mark in late April on the back of strong foreign institutional buying, but momentum has been fading amid concerns over the global economic climate and fears of an interest rate hike by the U.S. Federal Reserve.
Since late April, the weighted index has fallen more than 7 percent to close at 9,218.37 points Thursday.
According to the survey, 24 percent of the respondents said they are less willing to take risks in the equity market, while 19.2 percent of them said they have a larger appetite for risk in stock- trading.
Cathay Financial said that 24.8 percent of the respondents said they expect the local economy to improve over the next six months, while 32.4 percent of them think the economic climate will worsen over the next six months.
The results show that the economy optimism index for June fell to minus 7.6 from 14.4 recorded in May, according to Cathay Financial.
The financial holding company said that such caution toward the local economy came after recent disappointing economic data. Among the poor economic reports, the economic composite indicator for April flashed a blue light, indicating a recession.