Research Blog
Asian export growth: Starting to plunge
For more details, please contact:
Mingchun Sun
(852) 2773 8751
mingchun.sun@hk.daiwacm.com
Kevin Lai
(852) 2848 4926
kevin.lai@hk.daiwacm.com
Christie Chien
(852) 2848 4482
christie.chien@hk.daiwacm.com
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12 December 2011
Hopes have diminished that Asia’s economies might remain unscathed from the present bout of turbulence in the euro area. The latest trade data revealed a synchronized slowdown in export growth among Asian economies in the autumn. China’s export growth continued to moderate, falling to 13.8% YoY in November from 15.8% YoY in October; India’s fell sharply to 3.7% YoY from 10.8% YoY; Taiwan’s plunged to 1.3% YoY from 11.7% YoY, while Malaysia’s eased to 14.5% YoY in October from 17.3% YoY in September. And while Korea’s export growth picked up to 13.8% YoY in November from 8% YoY in October, that was largely due to a very low base last year.
The slowdown in export growth seems mainly driven by weaker demand from Europe. For example, China’s exports to Germany fell by 1.6% YoY in November (versus a 7.2% YoY gain in October) while its exports to Italy fell by an extraordinary 23.3% YoY. Taiwan’s exports to the EU plunged by 21.9% YoY; and Malaysia’s export growth to the EU also slowed to 4.5% YoY.
There are signs that Asian exports are likely to weaken further in the coming months as the euro area crisis deepens. China’s processing import growth weakened to 14% YoY for November from 17.7% YoY for October, in line with the lowest export orders component for the PMI in 33 months. China, being the assembly centre of Asia’s manufacturing sector, has a smaller share of contribution in the regional value-added chain than component-makers like Taiwan and Korea. As such, the latter are likely to suffer more than China itself from the slowdown in China’s processing trade.
In fact, Taiwan’s export outlook has already clouded, with orders flat and imports for raw materials, a leading indicator for future exports, dropping for the first time in 24 months in November. Meanwhile, Korea’s business survey forecast for new orders fell to a record-low of 89 for December, partially driven by the weakness from external demand.
As Taiwan and Korea are most sensitive to the global electronics cycle, they may have to endure a colder winter as consumers tend to cut discretionary spending in an economic downturn. Likewise, as the economies of Singapore and Hong Kong are heavily driven by service sector exports (especially in banking and finance), they are most vulnerable to global shocks. In contrast, economies that produce natural resources are likely to be less sensitive to the global slowdown. Malaysia, for example, which exports key commodities such as palm oil and energy, should have a thicker cushion for the external shock.
Chart: Asia (ex-Japan)* trade growth
* Composite of China, Hong Kong, India, Indonesia, Jorea, Malaysia, PPhilippines, Singapore, Taiwan, Thailand and Vietnam. November data for China, India, Taiwan and Korea only. For imports, data before December 2007 exclude Indonesia. Source: CEIC and Daiwa Capital Markets.
Mingchun Sun, Chief economist, Asia, ex-Japan
Kevin Lai, Senior economist, Asia, ex-Japan
Christie Chien, Research associate, Asia, ex-Japan
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