Taiwan's export orders unexpectedly dropped by 6.6%

While markets expected just a 1.8% dip.

According to DBS, yesterday’s export orders data (March) were rather disappointing. The YoY growth fell unexpectedly by -6.6%, far below the consensus forecast of 1.8%.

In the MoM (sa) terms, export orders also dropped by -4.3% in value, or -3.1% in volume. Demand from the US and Europe fell particularly sharply by -5.1% (MoM sa) and -8.5% respectively.

Here's more from DBS:

Orders from China and Hong Kong rose only slightly after the Chinese New Year holiday in February (+1.4%). This increases the concerns about the outlook of external demand recovery, in the context that the G2 economy still faces fundamental problems of public sector deleveraging, while the cyclical recovery in China remains slow and tepid.

Demand from Japan also dropped -2.5% in March. That said, it might be premature to ascribe this to the yen’s depreciation, which prompted Japanese firms to reduce imports and shift to domestic substitutes.

In fact, orders received from Japan have been trending down persistently ever since 2010, inlarge reflecting the sluggishness in Japan’s domestic demand.

Regarding the competition with Japanese exporters in the international market, there is also insufficient evidence that Taiwan’s market share has been squeezed by the Japanese rivals.

As of March, Japan’s export figures only showed a pickup in the yen-denominated export value, with export volumes remaining stagnant.

The continued deterioration in March export orders dampened the expectations of a resilient rebound in industrial activity after the CNY holiday. Given the disappointment in March orders, industrial production for the same month (due today) may also post slightly negative numbers, below the consensus estimate of 1.8% YoY.

The weaker-than-expected performance in the export sector poses downside risks to 1Q growth results and also the 2Q outlook.