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Confidence in Taiwan economy improves in March

Confidence in Taiwan economy improves in March

Local confidence in Taiwan’s economy improved for a second consecutive month in March as optimism over a possible resolution of the U.S.-China trade war offset concerns over disappointing economic data.

In a survey of its clients conducted by Cathay Financial Holding Co. in the first week of March, 26.7 percent of respondents said they expected the economy to improve over the next six months, while 33.8 percent said it would worsen.

The figure translated into an economic optimism index for the next six months of minus 7.1 in March, up from minus 19.2 in a similar poll conducted in February, Cathay Financial said.

The optimism index for current economic conditions, meanwhile, also improved to minus 10.4 in March, up from minus 28.8 in February, Cathay Financial said.

The market is anticipating that the United States and China will strike a deal soon to reduce their trade friction, which has hurt the world economy and depressed global demand, the company said.

The eighth round of talks is scheduled to be held in Beijing next week, followed by another round planned for Washington in early April.

Cathay Financial said the ongoing trade negotiations overshadowed concerns over a slowdown in Taiwan’s economy reflected in general weakness in local economic data, including the Purchasing Managers’ Index (PMI).

Though the PMI staged a slight rebound in February to 48.3, up 0.4 from a month earlier, it remained below 50, indicating contraction in local manufacturing activity.

The more upbeat mood over the Washington-Beijing trade issue also led to an improvement in confidence in the stock market, Cathay Financial said.

Since the beginning of the year, the weighted index on the Taiwan Stock Exchange, the Taiex, has risen 911.60 points, or 9.37 percent, with the help of a net year-to-date buy of NT$104.15 billion (US$3.38 billion) in shares by foreign institutional investors.

On Friday, the Taiex closed at 10,639.07, the highest level so far this year.

According to the survey, the local optimism index for the stock market improved from minus 23.4 in February to minus 12.7 in March, while the index gauging investors’ appetite to take risks rose from minus 7.5 to minus 3.6.

Respondents were also slightly more optimistic about Taiwan’s job market in the coming six months, with the optimism index for employment rising to minus 25.7 in March from minus 28.7 in February, the survey found.

The optimism index for the current labor market also rose to minus 24.8 in March from minus 31.4 in February, according to the survey.

Cathay Financial said respondents pegged Taiwan’s 2019 gross domestic product (GDP) growth at 2.2 percent on average, unchanged from a similar survey in February.