Taiwan export orders offer glimmer of light

Orders for Taiwan’s exports in January picked up from the previous month, offering a glimmer of hope that the worst may be over for Asia’s exporters, though they still face a tough quarter while Europe’s debt woes persist and concerns linger over a slowdown in China. Export orders rose 2.36 per cent in January from the previous month, faster than the “0.56 per cent month-on-month growth in December, though on a year-on-year basis, orders contracted for the second straight month and were at the lower end of forecasts. The month-on-month uptick, however, adds to other signs of a rebound for exporters, with recent surveys of manufacturers showing the pace of decline of new orders in Taiwan slowed in January while China’s factory sector expanded slightly in the month. “It signals a recovery of external demand in Taiwan earlier than previously expected,” said Raymond Yeung, senior economist at ANZ in Hong Kong. “A recovery of Taiwan’s export orders would be a bellwether for a rebound of regional trade.” Asia is suffering the effects of slowing demand in the West, and the International Monetary Fund last month warned that Europe’s debt crisis could tip the world economy into recession. However, a strong performance by emerging Asia equities so far this year indicates that investors are betting on a recovery in the region. Reduced inflation in the region allows central banks room to support economies, while falling commodity prices lower input costs for exporters. On a year-on-year basis, Taiwan’s export orders contracted 8.63 per cent in January, the biggest fall since August 2009. The figure was impacted by the Lunar New Year holiday in January, which closed factories and businesses for a week. The economics ministry said that in February, orders could rise as much as 20 per cent from a year earlier due to the holiday being in that month in 2011. By country, orders from China contracted a sharp 20.83 per cent in January from the same month a year earlier, while those from the US grew only 2.45 per cent, compared with 15.25 per cent in December. Orders from Europe contracted, but the rate, 1.17 per cent, was only a little worse than December’s 0.25 per cent contraction from a year earlier. Falling orders for electronics goods were the biggest factor causing a decline in orders from China, the ministry said. That trend is in line with recent actual export figures from Singapore, where January exports rose overall thanks to its pharmaceutical industry but exports of electronics tumbled. Taiwan’s own actual exports had contracted in January for the first time in more than two years, hit by the Lunar New Year holiday and as demand in all major markets tumbled. Demand for electronics and communications equipment fell more than 20 per cent. Analysts said eyes would be on China’s economy. The mainland is Taiwan’s largest trading partner. The economic picture in Europe and the US is “less pessimistic” than expected and “the biggest uncertainty now comes from China,” said Cheng Cheng-mount, economist at Citi in Taiwan. “Although China expects to maintain GDP at 8 per cent this year, its export activities could deteriorate sharply, and the domestic consumption the country relies more on is affected by the property market and capital tightening,” he said. Cheng said “We’re conservative towards major Asia’s export countries, but not to the extent of being pessimistic yet. At least the end-demand from Europe has not declined by a large amount, its economies are bottoming at an L-shape.” However, some of Taiwan’s tech exporters have begun to talk cautiously about a bottoming out, if not a recovery, in the first quarter. UMC, the world’s No.2 contract chipmaker, said this month that it sees an end to inventory correction in the near term, while computer maker Acer sees net profit in this quarter better than the previous quarter. But there is still a ways to go for exporters, and Taiwan’s central bank is likely to hold interest rates steady at its next quarterly meeting in March as it looks to give a little support to the sector yet keep a lid on prices. “Asia’s exports will remain in a tough environment and on a plateau until the second half at the earliest,” said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong, who forecasts full-year GDP at 1.9 per cent growth for the US, flat or a decline for Europe and a slowdown in China.