Business Confidence affecting share prices

I wrote two articles on 24 and 28 June 2015 on factors that affect share prices. I want to add one more important factor that can move share prices. That is Business Confidence.

Business confidence is based on sentiments of business owners projecting into the future. These are the people who run businesses and are better at gauging business operating environment.

There are three such business confidence indicators available for us to study.

1. “Business expectations of the manufacturing sector (business sentiments for July – December 2015)” based on survey conducted by EDB

2. “The Business Expectations Survey for the services sector for July – September 2015”, conducted quarterly by the Singapore Department of Statistics.

  1. Business confidence among SMEs, SBF-DP SME Index for third and fourth quarter of 2015.

One and two are public sector driven while Three is by private sector. One focuses on manufacturing sector, Two focuses on services sector while Three concentrates on Small and Medium-sized enterprises.

According to the SME Index, the business confidence index dipped for three consecutive quarters this year. That did not sound good.

In the case of Services Sector, the latest survey indicated a net weighted balance of 2% of firms is optimistic about business prospects for the second half of 2015 compared with the first half. This number was not a strong indicator of confidence in the service sectors.

As for the Manufacturing Sector, the same level of confidence was shown when compared with the Services Sector. “Overall, a net weighted balance of 2 per cent of manufacturers expects an improved business situation for the period July – December 2015, compared to the second quarter of 2015.”

Since June/July 2015 when the surveys were conducted, the business conditions faced by businesses deteriorated. Confidence of investors was affected negatively. The Straits Times Index (STI) declined from 3,317.33 points on 30 June 2015 to 2,832.64 points on 25 September 2015. That was a drop of 14.6%.

If the business confidence continues to decline, then the stock market will see dismal times ahead. I am not entirely optimistic at this current moment.

Articles referred to:

  1. “What factors move share prices – a graphical representation”, 24 June 2015

  1. “Another look at factors affecting share prices”, 28 June 2015

Copyright © 2015, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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