taiwan treasure at tough times nicholas kwan regional head of research, asia...
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TaiwanTreasure at
Tough Times
Nicholas Kwan
Regional Head of Research, Asia
Nicholas.Kwan@standardchartered.com
2
Sub-par performance expected
(10)
(5)
0
5
10
15
Dec-03 Dec-04 Dec-05 Dec-06 Dec-07
PCE GOV FCF Stks Net Export
TW: Real GDP % y/y
3
Source: Bloomberg
De-coupling or Re-coupling?
(5)
0
5
10
15
20
Dec-87 Dec-90 Dec-93 Dec-96 Dec-99 Dec-02 Dec-05 Dec-08
(2.0)
0.0
2.0
4.0
6.0
8.0
TW Real GDP (PCE) % y/y US Real GDP % y/y (RHS)
0
5
10
15
20
25
30
35
40
T-12
T-10 T-8 T-6 T-4 T-2
TT+
2T+
4T+
6T+
8T+
10T+
12T+
14T+
16T+
18T+
20T+
22T+
24
Sep-97 Jan-00 Jul-02
May-04 Jan-06 Sep-07
Trends in Leading Composite Scoring Indicators Index during past down-cylces
4
Downward inventory adjustment
Source: Bloomberg
(250)
(200)
(150)
(100)
(50)
0
50
100
150
200
250
2001 2002 2003 2004 2005 2006 2007 1-7 '08 2009
(4.0)
(2.0)
0.0
2.0
4.0
6.0
8.0
Services
Construction
Electricity, Gas & Water
Manufacturing
Mining & Quarrying
Real GDP % y/y (RHS)
TW: New Jobs Added (Average, '000)
20000
21000
22000
23000
24000
25000
26000
27000
28000
29000
30000
31000
Dec-92 Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10
2.0
3.0
4.0
5.0
6.0
7.0
DG Odrs - Inventory USDmn (Cons) (LHS)
US Existing Home Sales, Units mn 18m Fwd
5
Source: Ministry of Finance, Taiwan
Room for fiscal stimulus
(8.0)
(7.0)
(6.0)
(5.0)
(4.0)
(3.0)
(2.0)
(1.0)
0.0
1.0
2.0
2001 2002 2003 2004 2005 2006 2007 2008F 2009F
0
10
20
30
40
50
60
70
80
90
100Gen. Govt Debt, % of GDP Fiscal Deficit, % GDP (LHS)
6
Sources: DGBAS, Bloomberg
Inflationary risk diminishes
TW: CPI Components
Food 250.54
Clothing 47.46
Housing 307.94
Tpt/Comm 126.25
Medical Care 37.37
Education/ Entertainment 161.11
Misc 69.33
Sum 1000 (2.0)
(1.0)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Dec-03 Dec-04 Dec-05 Dec-06 Dec-07
Others Housing Food Transport TW: CPI % y/y
7
Source: Bloomberg
Monetary policy to be accommodative
80
82
84
86
88
90
92
94
96
98
100
Dec-00 Dec-02 Dec-04 Dec-06 Dec-08
2.0
1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0SCB TWD NEER TW Core CPI % y/y 12m MA CPI % y/y
(20)
(10)
0
10
20
30
40
50
60
70
80
90
Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09
29
30
31
32
33
34
35
Crude Oil % YoY 6m MA TWD Curncy
8
Source: Bloomberg
Monetary policy to ease
100
150
200
250
300
350
400
450
500
550
Dec-96 Dec-99 Dec-02 Dec-05 Dec-08
(3.0)
(2.5)
(2.0)
(1.5)
(1.0)
(0.5)
0.0
0.5
1.0
1.5
2.0Reuters CRB Index
TW Rediscount Rate %, 6m Chng
t-12m
(20)
(10)
0
10
20
30
40
50
60
70
80
Dec-96 Dec-99 Dec-02 Dec-05 Dec-08
(3.0)
(2.5)
(2.0)
(1.5)
(1.0)
(0.5)
0.0
0.5
1.0
1.5
2.0Dated Brent Spot, t-12, 3m Fwd
TW Rediscount Rate %, 6m Chng
t-12m
9
Source: Bloomberg
Liquidity remains flush!
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
4500000
Dec-00 Dec-02 Dec-04 Dec-06 Dec-08
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
NCD O/S NTON
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08
HKD
SGD
KRW
TWD - spread b/w 1m-interbank and O/N rate, %
10
Source: Bloomberg
Foreign capital outflow
TWSE (Net Foreign Inflow), TWD 100mn
2003 2004 2005 2006 2007 2008
Jan 233 958 -18 379 190 -344Feb -124 302 1145 660 381 983Mar 248 105 -297 -71 -1010 -184Apr 315 -162 -247 1701 781 -294May 738 -721 1266 -301 437 138Jun 726 55 1308 -370 1820 -1162Jul 748 -101 349 -289 -93 -1096Aug 842 575 -87 736 -1714 -232Sep 549 328 -106 788 636 -908Oct 1155 470 -308 581 526 -1141Nov -150 1145 1797 1134 -1500Dec 199 174 2387 726 250
Sum 5479 3129 7187 5674 703 -4240
11
Stronger position to weather downturn
Sources: CEIC, Bloomberg
(20)
(15)
(10)
(5)
0
5
10
15
20
25
30
Dec-94 Dec-97 Dec-00 Dec-03 Dec-06 Dec-09
(10)
(5)
0
5
10
15
Real M1A % y/y (LHS) RGDP (PCE+GV+FCF) % y/y
12
Stronger position to weather downturn
13
TW: Stronger position to weather downturn
0 250 500 750 1000 1250 1500 1750 2000
Mainland China
Japan
Russia
Taiwan
India
S Korea
Singapore
Hong Kong
Malaysia
Thailand
Indonesia
PhilippineForeign Exchange Reserve, USD bn
* latest availableSource: Wikipedia
14
Source: SCB Global Research
112
-29
145
271
444480
390
276
118
(100)
0
100
200
300
400
500
600
700
2000 2001 2002 2003 2004 2005 2006 2007 2008
70
80
90
100
110
120
130
New Mortgage Loans, TWD Bn
Cathay Px Index
Stronger position to weather downturn
60
80
100
120
140
160
180
Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08
HK
MA
KW
TW
Residential Property Price Index (2000p)
15
Looking further beyond…
L-T growth prospect improves Public sector to jump start massive infrastructure projects
– Earmarked by President Ma Y J during his election campaign and worth a total of TWD3.9trn
Government seen embarking on series of reforms to bolster long-term growth prospect and competitiveness
– Including reduction of key corporate, individual, inheritance and gift tax rates
Government showing strong ambition to becoming key regional business and financial hub
– Strong position to tap growing mainland China that would help strengthen presence in Greater China wealth management industry as well as key fund raising centre
KMT enjoys strong support in government and given strong public endorsement on cross-straits policy
– Including tourism, direct air and shipping, lifting of investment limits, etc
16
Disclaimer
This document is issued by Standard Chartered Bank (SCB). While all reasonable care has been taken in preparing this document, no responsibility or liability is accepted for errors of fact or for any opinion expressed herein. Opinions, projections and estimates are subject to change without notice. This document is for information purposes only. It does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices or any representation that any such future movements will not exceed those shown in any illustration. The contents of this document are not made with regard to the specific investment objectives, financial situation or the particular needs of any particular person. Any investments discussed may not be suitable for all investors. Past performance is not necessarily indicative of future performance; the value, price or income from investments may fall as well as rise. SCB, and/or a connected company, may have a position in any of the instruments or currencies mentioned in this document. You are advised to make your own independent judgment with respect to any matter contained herein. In the U.K., SCB conducts designated investment business only with Eligible Counterparties and Professional Clients and this document is directed only at such persons. Other persons should not rely on this document. In Singapore, securities research documents are only issued and intended for persons whose business involves the acquisition and the disposal of, or the holding of, capital markets products and accredited investors. Copyright: Standard Chartered Bank 2008. Copyright in all materials, text, articles and information contained herein is the property of, and may only be reproduced with permission of an authorised signatory of, Standard Chartered Bank. Copyright in materials created by third parties and the rights under copyright of such parties is hereby acknowledged. Copyright in all other materials not belonging to third parties and copyright in these materials as a compilation vests and shall remain at all times copyright of Standard Chartered Bank and should not be reproduced or used except for business purposes on behalf of Standard Chartered Bank or save with the express prior written consent of an authorised signatory of Standard Chartered Bank. All rights reserved. © Standard Chartered Bank 2008
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