Taipei: Taiwan's consumer confidence weakened slightly in October as investors turned cautious about the local stock market on the possibility of a major technical pullback after a recent strong showing, National Central University (NCU) said Monday.
According to Focus Taiwan, citing a survey conducted from Oct. 18-21, NCU reported that the October consumer confidence index (CCI) fell 0.73 points from a month earlier to 63.96, with the subindex on the stock market dropping by 15.16 from September to 36.52. The CCI measures sentiment over the next six months in six areas: consumer prices, domestic economic climate, stock market, durable goods purchases, employment prospects, and family finances. The subindex on the stock market was the only one that moved lower from a month earlier.
Speaking with reporters, Dachrahn Wu, director of the NCU Research Center for Taiwan Economic Development, explained that the fall in the stock market subindex reflected worries about possible major corrections on the Taiex, the weighted index on the Taiwan Stock Exchange, which has soared 21.53 percent this year largely on the AI boom. On Monday, the Taiex closed up 1.68 percent amid optimism over U.S.-China trade talks and hopes of a rate cut by the U.S. Federal Reserve but failed to remain above the 28,000 point mark on profit-taking.
Wu noted that current caution about the stock market does not suggest investors have lost faith in its future uptrend, but many believe share prices have reached relatively high levels and it is not an opportune time to chase prices. Among the other five factors, the subindexes on employment, consumer prices, and family finances rose 2.51, 2.27, and 2.17, respectively, from a month earlier to 69.58, 32.22, and 74.71 in October. Additionally, the subindexes on the local economic climate and purchases of durable goods also moved higher by 2.17 and 1.67, respectively, from a month earlier to 78.35 and 92.37.
The economist indicated that while Taiwan continues to set records in its exports driven by AI applications, the country still faces challenges, including a possible tariff on semiconductors due to a Section 232 investigation by the U.S. Trade Expansion Act. There are also fears that AI development may become a bubble, and when it bursts, the current large investments could pose risks to many enterprises.
According to NCU, subindex scores between 0 and 100 indicate pessimism, while those between 100 and 200 reflect optimism. In October, none of the factors reached optimistic levels, the university noted. Also in October, the home-buying index compiled by NCU and Taiwan Realty rose 1.48 points month-on-month to 90.42, the university added.
The university's October CCI survey collected 3,245 valid responses from Taiwanese consumers aged 20 and older. It has a 95 percent confidence level with a margin of error of plus or minus 2 percentage points.