Taiwan's export growth pegged to dip 1.5%

Here's what to blame.

According to DBS, Taiwan's external trade data for November will be released today. Export growth will remain negative, and the rate of decline will be close to October’s -1.5% YoY, as disclosed by the finance ministry officials last week.

Here's more from DBS:

This will miss the market consensus forecast of 2.1%. In contrast with the sluggishness in exports, export orders growth has turned positive since July and picked up to 3.2% in Oc- tober.

Some are worried that the divergence between export orders and exports will be a lasting phenomenon, reflecting the structural problem of industrial hollowing out. We are not particularly concerned in this regard.

The sharp rise in overseas pro- duction ratio occurred in the early-to-mid 2000s, from an average of 18% in 2000-2003 to 41% in 2004-2008.

The gap between export orders growth and export growth widened from 1.8ppt to 4.5ppt during the same timeframe. As of the end of 2008, over- seas production ratio has already reached 47%. It rose further only slightly during the post-2008 period, climbing to 52% as of end-2012.

As such, the gap between export orders and exports has also narrowed in the last five years. From a technical perspective, the correlation be- tween these two indi- cators remains intact.

The recent rebound in export orders implies that a cyclical recovery in exports should be on the way. It is just a matter of time.