December’s trade figures were weak for Asian trade bellwethers. USD-denominated exports decreased by -1.2% y/y in South Korea and -3% in Taiwan. Lower demand for electronic products and weaker demand growth from China were among the reasons. Manufacturing PMIs signal a contraction of activity in the short term (with South Korea’s PMI at 49.8 and Taiwan’s at 47.7 in December) on the back of weaker new orders. In the near term, we see limited reasons for improvement. First, because corporates will not make major moves before the end of US-China trade talks. Second, because demand growth in China will likely be subdued in the near term. A gradual improvement could be expected from Q2, after the talks and when China’s stimulus effects start to kick in. Overall, we expect economic growth to be more moderate in both countries this year, at +2.5% in South Korea (after +2.7% in 2018) and at +2% in Taiwan (down from +2.6%).
