Taiwan Q2 exports end on a soft note

Exports tumbled by 13.9% y/y in June. On a seasonally adjusted basis m/m, exports fell sharply by 6.7% m/m, having expanded at a solid 4.3% m/m in May. Price compression remained the key culprit for exports weakness.

Indeed, shipments of chemicals, mineral products and plastic plummeted 21.4% in the first half of 2015. Even excluding these three categories, which contained most of the price distortions, exports still plunged 12.6% y/y in June, indicating that the drag from a slowdown of external demand actually intensified. 

Meanwhile, the sluggishness was compounded by one fewer working day. Taken together, the soft patch in end-demand for consumer electronics such as PCs and mobile handsets has resulted in inventory buildup, leading to precautionary scale-down of production across the supply chain. This ultimately weighs on exports. 

Looking ahead, a late summer turnaround in activity remains in place, helped by stabilised oil prices and gradual recovery from US and Europe. Furthermore, new product launches such as iPhone 6s should help lift consumer demand while supply chain of components start to ramp up production in Q3, says Barclays.

Excess liquidity was TWD27.2bn/day in May, lower than the average between January and April of TWD36.8bn. As such, rate normalisation is expected to begin in December this year, added Barclays.