Taiwan's export growth expected to slow

Demand from China will likely support a modest recovery in the coming quarters.

DBS Group Research noted:

October trade data are due today. Export growth is expected to slow to about 1% YoY after jumping to 10.4% YoY in September. The strong rise in September exports should have been exaggerated, due to the temporary boost from China’s festive demand and the release of new electronics products in the US.

Excluding the distorting factors, we think the underlying trend of export demand is mildly upward. Export orders, which are less affected by seasonal effects, rose modestly to 1.9% in September. Export orders are also a better indicator for the source of final demand. Demand for electronics components related to the release of new smartphone and tablet products by the US electronics firms should be captured by Taiwan’s orders received from the US, although the product assembly process could be completed in China.

Note that export orders from China (+4.2% MoM sa on average in Aug-Sep) rose more apparently than orders from the US (+1.0%) in recent months, which indicates that China’s domestic demand in fact played a bigger role in driving up Taiwan’s exports. The rise in Taiwan’s export orders from China is also in line with the latest improvement seen in China’s GDP and PMI data. The cyclical upturn in demand from China is expected to support a modest recovery in Taiwan’s exports in the next 2-3 quarters.

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