Taiwanese exports rise in July, break downturn jinx after 18 months

Exports in Taiwan rose in July, posting the first positive reading in 18 months. July’s data further confirm that the Taiwanese economy is coming out from recession and returning to a growth trajectory. And importantly, growth will gather pace in the third quarter.

Taiwan’s trade figures showed that exports rose by 1.2 percent y/y in July, government data released showed. Further, the Taiwan dollar strengthened 1 percent this week, hitting a one-year low of 31.1 against the USD on Wednesday. The TAIEX also rose for three consecutive days, gaining about 1 percent, both being helped by the improvement in domestic data.

Moreover, exports and production numbers are only marginally positive at present. A further rise is expected in the second half of 2016 as the key electronics industry will enter the peak season. But exports and production growth would stay subpar for a long time, given that the overall external trade sector still faces structural headwind, DBS reported.

However, there remains little reason to raise the expectations for policy stimulus. The scope for monetary easing is narrowing as interest rates are already approaching the historical lows. But the size of fresh spending would be modest, given that the DPP-led new government holds a conservative stance on fiscal policy and emphasizes the goal of curbing public debt expansion.

"We continue to expect a 12.5bps rate cut by the central bank at the September meeting, the last move in its ongoing easing cycle. The cabinet is reported to be mulling fiscal stimulus measures," DBS commented in its research report.