Analysis: Taiwan’s trade falls

Taiwan’s exports fell 24.6% in August over the same month last year according to figures from the Ministry of Finance. Imports also fell, down 32.3%, although the ministry reported that the trade balance for the month was “healthy”, standing at $1.96 billion (£1.2 billion).

According to a note released today, Lombard Street Research suggests a rally in Taiwanese shares may have further to go.

Gabriel Stein, the firm’s chief economist, says both exports and export orders have been on a rising trend since the start of the year, which is a positive sign for Taiwan, although he cautions that much depends on whether China continues to buy Taiwan’s products.

He highlights the impact on export figures of Typhoon Morakot, one of the worst to hit the country in half a century.

However, Stein says the export data is misleading, as non-seasonally adjusted numbers do not give an accurate picture of recent trends. On a seasonally-adjusted basis, Taiwan’s exports have been rising for seven consecutive months, Stein says in his report.

“The trend is very clearly up—perhaps not a strongly as one could wish, but nevertheless on the right track.”

However, he adds that ultimately there is a danger to this positive picture. “China (including Hong Kong) is Taiwan’s greatest export market. It is clear that the Chinese authorities have deliberately encouraged imports from Taiwan in order to show the island’s dependence on the mainland and the positive effect of closer political relations,” he says. “But much of this is for assembly and re-export, and if the rest of the world won’t buy Chinese exports, this will hit those who export to China—Taiwan and its neighbours like Korea and Japan.

“Nevertheless, for the moment, Taiwan’s future does not look too bad. GDP rose by 2.3% quarter-on-quarter in Q2, consumer prices are falling (so no risk of a tighter monetary policy) and fiscal policy remains easy,” Stein adds.

Meanwhile Taiwan’s Consumer Price Index (CPI) rose 1.8% to 106.17 between July and August as food and fuel prices increased following the destruction caused by Typhoon Morakot.

The annual change for CPI in August, compared with the same month the previous year, moved down 0.81%. For the first eight months of 2009, the CPI decreased by 0.72% over the same period the previous year, as price of commodities moved down 1.77% and service went up 0.12%.

The Wholesale Price Index (WPI) in August was 104.43, an increase of 2% from July, owing to rising prices of crude petroleum, natural gas, basic metals and chemical materials. However, the annual figures show a fall of 11.24% from August 2008 when commodity prices fell.

Domestic sales excluding imports, and import and export prices increased 2.60%, 2.09% and 1.36% individually between July and August. Over the year they fell 13.16%, 12.47% and 7.99% respectively.

For the first eight months of 2009, the WPI decreased 11.67% compared with August 2008.

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