Taiwan’s export growth strong at 11.2%, but investment stalls

TAIPEI - Diversification has helped Taiwan to thrive for another quarter, but stronger investment push is needed, says the French banking group Natixis in an Asia research note.

“Under the rising tide of protectionism, Taiwan sustained resilient export growth at 11.2% YoY in Q2 2018,” says Natixis. “Although the direct contribution by China has reduced, there is a big jump in Hong Kong possibly due to the trade war.

“Overall, export growth into Greater China remained flat, while other markets continued to expand, especially ASEAN and Europe. The inflow of ASEAN tourists also offset a reduction in the number of Chinese tourists.

“However, the fading base effect will make the trade condition more challenging in H2 2018.

“As far as domestic demand is concerned, consumption remained solid but investment was weaker than expected. The fall in investment has significantly narrowed comparing it to 2016, but now stalled.”

Natixis says another cloud in the horizon relates to the impact of higher oil prices and a weaker NTD, which fed import costs by 10% YoY in June 2018.

“This could eventually weigh on corporate profits, as the increase in domestic sales and export prices was much slower than that of import prices.

“In other words, Taiwanese firms might continue to face higher costs but find it hard to raise prices in front of global competition.” www.natixis.com (ATI).