Asia’s Trade Bellwether Shrugs Off Politics For Record Results

13-Jul-2017 Intellasia | Bloomberg | 6:00 AM Print This Post

Global demand for new smartphone models is driving Taiwan’s trade surplus and corporate revenues to record highs, underlining the strength of Asian trade even in the face of geopolitical jitters and rumours of protectionism.

As a result, Taiwanese companies are posting record sales, a development they owe largely to an upswing in the global electronics industry. As Apple Inc. and Samsung Electronics Co plan new smartphone models, that in turn is propelling demand for components such as semiconductors made not just in Taiwan, but also South Korea, China, Singapore and Malaysialifting exports across the region.

Exports account for about two-thirds of Taiwan’s economy, and machinery and electronics make up the bulk of those exports. The global semiconductor market is estimated to grow by 11.5 percent to $378 billion this year, the fastest pace since 2010, according to a report by World Semiconductor Trade Statistics.

“The launches of the new Samsung S8 and Apple iPhone 8 smartphone models in 2017 is one of the key drivers of stronger demand for semiconductors,” said Rajiv Biswas, Asia-Pacific chief economist for IHS Markit. “The upturn in Taiwanese exports is a leading indicator of global electronics demand.”

The island’s trade surplus rose to a record high $5.83 billion in June driven by a boost in demand for chips. According to Taiwan Stock Exchange data, combined revenues from all listed companies rose 4.8 percent to NT$2.65 trillion ($86.7 billion) in June, a record for the month, sales in the first half of the year rose 4.2 percent to NT$14.87 trillion, also a new high.

That should help revive growth after output in the first three months of the year cooled from a strong pace in the fourth quarter of 2016. Economists at DBS bank are tipping growth of 2.5 percent this year.

Political Tensions

Taiwan’s economy rose 2.6 percent in the January-March quarter, expanding for a fourth straight quarter after the island fell into recession during late 2015 and early 2016. Exports are growing despite the Taiwan dollar’s 5.6 percent gains this year, the best-performing Asia currency tracked by Bloomberg. It fell 0.03 percent to NT$30.593 at the end of trading Tuesday.

The better performance also comes amid simmering political tensions with China, which claims sovereignty over self-ruled Taiwan and threatens to invade if Taipei moves to formalise its de-facto independence. Beijing has refused all official contact with the administration of independence-leaning President Tsai Ing-wen and protested US President Donald Trump’s proposal to sell $1.3 billion in arms to Taiwan.

About 40 percent of the export powerhouse’s shipments go to China as it plays a vital role in supplying widgets for the mainland’s manufacturing machine. That also means trade tensions between the US and China could also hurt.

Policy makers in Taipei are conscious of the ongoing trade and political risks and are attempting to diversify their exports into regions such as Southeast Asia by opening new trade offices and boosting tourism. That’s a smart tactic considering the nation’s status as a bellwether of global supply chains whose economy is at the mercy of global cross currents, said Raymond Yeung, greater China chief economist at Australia & New Zealand Banking Group Ltd in Hong Kong.

“It is this reason that when the big countries sneeze, Taiwan will catch a cold,” he said.

https://www.bloomberg.com/news/articles/2017-07-11/the-canary-in-the-coal-mine-for-world-trade-is-taiwan-exports

 


Category: FinanceAsia

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