ECONOMY | Staff Reporter, Taiwan

Taiwan’s export order growth may have dropped to 3.2% in September

The declining demand from China has been a big drag on the country’s exports since the beginning of this year.

DBS says the country’s economy will tend to underperform during a weak global environment, given its high dependence on exports and concentration on the electronics sector.

Here’s more from DBS:

September export orders will likely show weaker growth of 3.2% YoY, down from 5.3% in the previous month. In light of the high volatility in the global financial markets in Aug-Sep, business sentiment has deteriorated worldwide and orders from overseas have fallen on the sequential basis since August – demand from Europe has dropped particularly. The situation of new orders has worsened further in September according to the preliminary information revealed by the PMI survey.

Going forward, the possibility of a recovery in export demand should be higher than the possibility of a persistent downturn. Global financial markets have stabilized in October on expectations of a solution to European debt crisis. If the recovery in sentiment can be sustained, business restocking may follow in the later part of 4Q.

Putting aside the European troubles, a big drag on Taiwan’s export orders and exports since the beginning of this year in fact is the declining demand from China. The pickup in China’s September PMI, albeit modest, at least can lessen the concerns over a hard landing in the Chinese economy in the iemmediate term. Meanwhile, the latest US data including ISM and retail sales turned out to be more positive than expected, which has significantly lowered the risk of a US double-dip.

Beyond the short term, the outlook for external demand remains challenging however, taking into account the problem of public debt overhang in the advanced economies and the structural imbalance in the Chinese economy as a consequence of investment overexpansion. Given Taiwan’s high dependence on exports and concentration on the cyclically-sensitive electronics sector, the economy will tend to underperform during a weak global environment, compared to Asian countries with stronger domestic demand to cushion the impact of weak exports.

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