Taiwan sees chance to reclaim lost industries


It plans to be a centre for them as trade war forces tech suppliers to rethink reliance on China
Newsfeed19 Nov 2019
Photo credit: AFP Photo


Market news selected by the DBS Chief Investment Office


REST OF ASIA

Taiwan sees the opportunity to revitalise its economy as a centre for advanced manufacturing, reversing decades of investment and know-how outflows across the Taiwan Strait, as the trade war forces technology suppliers to rethink their reliance on China.

Taiwanese companies have pledged to invest almost NTD1.2t (USD39b) at home since the government initiated a programme at the beginning of the year to attract investment from local companies with facilities in China, with a focus on high-end industries. The programme is credited with helping the Taiwanese economy weather the US-China trade war better than its peers in the region, and Minister without Portfolio Kung Ming-hsin says the impact will be felt by the local economy for years to come.

The plan to lure local companies to invest back home is one of two competing economic visions for Taiwan as voters weigh their choices ahead of the 11 January presidential election. While incumbent President Tsai Ing-wen is pinning Taiwan’s economic future on developing industries such as advanced manufacturing, clean energy, and defence domestically, her opponent, Han Kuo-yu of the opposition Kuomintang, advocates further removing barriers to doing business with China.

Despite the trade war taking a toll on growth in Asia’s export-dependent countries, Taiwan is on track for its gross domestic product to rise 2.5% this year. The island’s shipments to the US rose almost USD4.2b in the first half of 2019, gaining from China’s loss of exports to America, a recent United Nations Conference on Trade and Development report noted.

Kung said that the government is readying land in southern Taiwan homecoming companies can begin moving into starting from 2021. Taiwanese officials are also working to expand an existing science park in southern Taiwanese city of Tainan and create a brand new one in the neighbouring Kaohsiung city, Kung said.

“We will only have three to four years to reshape our industries, and the outcome will decide our future for the next decade or two,” Kung said. “We are planning to turn Taiwan into an advanced manufacturing centre because companies now are moving production of their premium products home.” – Bloomberg News.

The Taiwan Stock Exchange Weighted Index (Taiex) rose 0.64% to 11,599.78 on Monday (18 November).

Australia’s S&P/ASX 200 Index was little changed on Tuesday (19 November) morning. It fell 0.40% to 6,766.82 on Monday.

South Korea’s benchmark Kospi Index fell 0.87% to 2,141.87 at the open on Monday, after finishing 0.07% lower to 2,160.69 the previous session.


MAINLAND CHINA & HONG KONG

While China’s central bank is helping stem the panic that in October drove its bond yield to a five-month high, Monday’s (18 November) buoyant mood is unlikely to last.

A series of unexpected policy rate cuts and liquidity injections keep triggering mini rallies in China’s sovereign debt market this month. The latest came Monday, when the People’s Bank of China (PBOC) lowered borrowing costs on short-term loans for the first time since 2015 and injected USD26b into the financial system. China’s 10-year benchmark yield fell 5 bps to dip below 3.19% for the first time in a month.

It is déjà vu for bond investors who saw yields drop twice before in November following similar supportive actions from the central bank. But any bond rally will be limited as Beijing’s prudent approach to stimulus has not changed, while a trade agreement may boost risk sentiment, according to an economist.

The small adjustment to the rates – Monday’s cut was just 5 bps – signal a continuation of the PBOC’s restrained stimulus policy that prevented Chinese bonds from joining in a global rally this year. That is even as data continue to show weaker economic growth across the board. – Bloomberg News.

The Shanghai Composite Index rose 0.62% to 2,909.20 while the Hang Seng Index climbed 1.35% to 26,681.09.


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