"Taiwan maintains its competitiveness in the global themes of
Internet of things and electric vehicles. The government
focuses on revamping the economy through cultivating high-tech/
innovative industries and trade & investment policies (to
diversify the product mix & markets)."
Meanwhile, there are potential threats to equity market prices.
US trade, tax and foreign policies under a Trump administration
casts significant uncertainty over Taiwan’s
economic and market outlook, according to HSBC. This is due to
a combination of openness to trade, large direct and indirect
exports to the US, equity market exposure to exporter sectors,
and current security relationships with the US.
The tech sector is also facing challenges from muted global end
demand and increasing competition throughout the supply from
China. Alternative growth drivers – other than tech,
manufacturing and exports – have not been
"Any tension in the Sino-US-Taiwan relations or deterioration
in cross-strait relationship under the new government remains a
concern, with pressure from China continuing to complicate
Taiwan’s progress in negotiating free trade
agreements with major trading partners and Chinese tourist
arrivals in Taiwan slowing sharply," HSBC’s note
added. "Currency and commodity price volatility is a swing
factor for exports, the economy and earnings."
ICBC Standard Bank: Expert eye on repo
Taiwan is a large market for repo and the presence of large
financial groups, such as Sinopac, KGI and Yuanta, along with a
number of other significant asset holders, means that there is
a considerable scope for financing. The participants are
experienced users of GMRA, and the open and transparent legal
system places no issues around netting.
The amount of international business conducted locally depends
on the attractiveness of repo interest rates compared to the
Taiwan Futures Exchange (TAIFEX), which tracks the provision of
cash from the Central Bank. The market is flexible and
adaptable, and statistics show that the bulk of trades in the
market are in the short-term.
Eric Li, repo trader at KGI Securities, sees the need for
financing to further expand in the domestic market in 2017.
"Given the low interest rate environment in the domestic market
and the relatively lucrative US dollar-denominated papers,
Taiwan’s market has been showing strong demand
since last year, and is expected to remain in its strong
momentum for growth in 2017."
In general, the diversity of names and the overall liquidity in
Taiwan’s repo market grew steadily during 2016 and
it is expected to remain highly active and favourable for
trading among the dealers