Taiwan's third quarter could be weaker than expected

The latest trade data continued to disappoint. Total value of export orders shrank 8.3% (YoY) in Aug15, a deeper decline than -5.0% in Jul15 and far worse than the consensus forecast of -4.8%. Excluding the price factors, export orders also exhibited a downtrend, dropping by 0.9% (MoM sa) in Aug15 on top of the 0.5% decline in Jul15. Demand from China and Europe deteriorated the most. The high-tech segment was affected, including both electronics components and precision instruments. 

In addition to the slowdown of the Chinese economy, the recent increase in global financial market volatilities may have also hurt sentiment and led to postponement of business decisions. The 3Q growth results could be weaker than expected. 

"We currently predict GDP growth to rise 0.6% (YoY) in 3Q, little changed compared to 0.5% in 2Q. But the possibility of negative numbers can't be totally ruled out", notes DBS Group Research.

The hope rests on 4Q. Exports demand from the US should receive a boost from the release of new Apple products. Note that, however, stronger electronics demand will be seasonal. The year-ago comparison base was very high, thanks to the popularity of the large-sized iPhones released last autumn. Whether the boosting impact from the new iPhones will be equally large this year is a question. September's export orders data will offer more clues.