Export Slowdown Could Hinder Taiwan ETF | ETF Trends

The Taiwan exchange traded fund could witness subdued appreciation next year as the Taiwanese government lowers its outlook due to a slowdown in exports.

The Taiwanese central bank is maintaining its benchmark rate for the 10th consecutive meeting after the government trimmed its economic forecast for the year to 1.74% from 2.31% earlier, pointing to a slower-than-expected 0.44% expansion in exports, Bloomberg reports.

“Taiwan’s inflation is still low, so there’s no need to raise the rate,” Raymond Yeung, an economist at Australia & New Zealand Banking Group Ltd., said in the article. “With export data softening lately, growth prospects look bumpy. Considering the balance between growth and inflation, maintaining the key rate is the best call.”

Exports comprised about 60% of Taiwan’s gross domestic product in the third quarter, declined in September and October year-over-year due to diminished demand from China, the island’s largest overseas market.

Taiwan and China have fostered closer relations, opening their borders to increased trade. Marcella Chow, an economist at Bank of America Merrill Lynch, though, cautions that a failure to pass a pact opening services sectors between Taiwan and China could cap next year’s growth at 2.5%.

The statistics bureau projects the economy will expand 2.59% in 2014, lower than the previous 3.37% estimate.