Taiwan's exports up 2% in March

Trade recovery could be underway, says analyst.

According to Bank of America Merrill Lynch, Taiwan's exports rose +2.0% yoy in March after recording +0.4% in the first two months of the year, beating the market forecast of 0.7% yoy.

Here's more:

Tech exports expanded 3.1%, while non-tech rose 1.3% yoy. On average, export growth momentum slowed slightly, to +1.0% in 1Q14 from +1.8% in 4Q13, while import growth weakened to -1.6% from +2.1% in 4Q13.

After witnessing a mild export recovery in 4Q13, the moderation in 1Q14 continues to cast doubt over Taiwan's economic growth prospects and indicates a worrying trend that further economic recovery may take longer to materialize. 

However, as Jan-Feb data are distorted by Chinese New Year, the better-than-expected cleaner March data today gives us comfort that a moderate trade recovery could already be underway.

We are encouraged by the +10.3% yoy, +10.0% yoy and +7.8% yoy acceleration of exports to US, Europe and Japan, respectively. Coupled with the pick-up in demand from ASEAN, the improving shipments to developed economies helped to cushion the impact of flagging demand from China (-3.7% yoy in March).

Looking ahead, the bifurcating momentum in China and the developed economies will likely map out Taiwan's export outlook for the rest of this year. On one hand, our China team recently cut its 1Q14 growth forecast to 7.3% from 8.0% and its 2014 annual GDP growth forecast to 7.2% from 7.6%. 

China is Taiwan's largest export market and it accounted for 26.8% of total exports in 2013. Lower demand for Taiwan's exports to China would likely cause Taiwan's investment, profits, labor market and private consumption to fall. 

Meanwhile, this may be offset by better demand from the US, Europe and Japan, as much of the exports to China are part of a supply chain to these developed markets. In addition, Taiwan is well-positioned to benefit from the steadily recovering developed economies -- Past boom experiences point to Taiwan and Singapore as the two most likely beneficiaries.