Early signs of recovery in Taiwan's exports

Taiwan's exports contracted 3.8% y/y in May (Apr: -11.7%; Mar: -8.9%), much stronger than the consensus forecast (-9.5%). On a seasonally adjusted basis m/m, shipments rose 4.5% m/m (Apr: -1.3%; Mar: -3.9%), the first sequential increase in three months, notes Barclays.

The deceleration in growth momentum also eased moderately, printing -18.3% 3m/3m saar (Apr: -24.8%; Mar: -17.0%). Overall, the upside surprise, which mirrored the better-than-expected China exports in May, was helped by a smaller compression in the value of petrochemicals and mineral products shipped.

Another factor was stronger machinery and auto parts shipments as well as the easing of water rationing, which also helped the headline. On a per day basis, exports actually rose 1.0% in May (against the 3.8% headline decline), as there was one fewer working day this year. Meanwhile, exports in level terms actually rose to the highest this year - returning to a level close to November last year. To us, this is a reasonably healthy trade report, especially when compared with the broader regional backdrop.

Since the start of the year, Asian producers have become more cautious amid rising external uncertainty and extended currency volatility - resulting in a greater aversion to holding inventories. This weighed on production - and ultimately exports, leading to a precautionary pull back in intra-Asia trade. 

"The macro outlook remains constructive, and the outlook for electronics shipments will improve modestly, once the recently launched consumer electronics products start to enter the mass production phase of their product life cycles", said Barclays in a report on Friday.