Taiwan's export recovery reflect lackluster performance in 1Q

No strong uplift is seen in the offing with orders from China coming in weak, a European market still sluggish, and the US unstable.

DBS reports that consensus expects a YoY contraction of -3.9%. While growth in export orders has picked up to 3%, it only served to offset the - 2.1% drop in the previous month. DBS's GDP growth forecast for 2012 is kept below consensus at 2.9%.

Here's more from DBS Group Research:

March export orders are due to come out. Consensus expects a YoY contraction of -3.9%, and DBS expects a relatively milder decline of -0.6%. In sequential terms, DBS reckons that the MoM (sa) growth in export orders has picked up to 3%, which however, came after a - 2.1% drop in the previous month. This will continue pointing to a moderate recovery trend in export orders and exports.

In fact, Taiwan’s export recovery in 1Q underperformed that of the regional peers like Korea and Singapore. Orders from China were relatively weak, a key reason explaining Taiwan’s underperformance. On expectations that China’s economic growth will reaccelerate on the back of selective policy easing, Taiwan’s export growth may pick up at a somewhat faster pace from 2Q onwards.

That said, the European demand will likely remain sluggish for some time, taking into account Europe’s unresolved debt crisis, sentiment deterioration and fiscal tightening. It is also questionable whether the strong recovery in exports to the US, the main driver on Taiwan’s export growth in 1Q, can be sustained for long. Owing to the concerns about the G2 growth outlook, no strong uplift in Taiwan’s export growth in the coming quarters is foreseen. GDP growth forecast for 2012 is kept below consensus at 2.9%.

Regarding the external balance, trade surplus has remained steady at USD 2.4bn in March, versus the USD 2.8bn in Feb. Whereas the energy import bills have been inflated by oil prices, imports of capital goods have remained at subdued levels to offset, reflecting the weak incentives of investment in local manufacturing industry, in the lack of a strong turnaround in the export outlook. A steady trade surplus should, in turn, provide a stabilizing force on the Taiwan dollar during the risk-off global environment.