2025年第四季度台湾图景

Summaryview ▪Taiwan's GDP growthremained resilient in H1,mainly driven by strong exports stemming from surgingdemand for AI chips. Despite the 20% universal tariff, August data demonstrated export resilience. Lookingahead, we see a limited impact from tariffs, as Taiwan is likely to be exempt from tariffs on semiconductors.Further, the risk from potential pharmaceutical tariffs is minimal, as pharmaceuticals constitute less than 0.1%of total exports.▪We are now forecasting Taiwan’s real GDP growth at 5.6% in 2025 and 2.4% in 2026. Upside potential couldcome from further increases in AI-related semiconductor demand, including those related to the relaxedrestrictions by the US on high-end chip sales to mainland China. Downside risks may arise from the negativeeffects of additional tariffs.▪Inflation is on track to cool down. Headline CPI and core CPI have remained below 2% for three consecutivemonths, led by softened consumption. Meanwhile, the property market has been slowing since the tighteningof credit, suggesting housing prices will likely fall.▪Following its September decision to keep the policy rate unchanged, we expect the CBC to maintain thisstance, given the improved economic outlook and stabilized inflation expectations.The primary risk for a CBCrate cut would stem from a deceleration in the US economy, coupled with sharper Fed rate cuts.▪We remain constructive on the TWD into Q4. Strong AI spending globally should continue to support Taiwan’sexport growth. Hence, it is likely to provide more upside to earnings per share for the electronics sector, whichshould encourage more equity inflows. In addition, a slowdown in domestic outflows would also support TWD.▪Taiwan’s rate curve is likely to steepen. Given that Taiwan’s growth is uneven, we see some downside risks tofront-end rates as more policy rate cut expectations are likely to be priced in.▪With banks continuing to support the TGB market given the slowing loan growth, we see limited upside risk forTGBs. In Q4, there would be three TGB auctions (two for 10Y TGBs and one for 30Y TGBs). Taiwan economy remained strong in H1, leading to an upward revision on growthoutlook in 2025-26 Breakdown of GDP growth Sequential growth •Taiwan's GDP growth surged to a 4-year high of 7.9% YoY in Q2, significantly exceeding the consensus of 5.7% and our forecastof 4.5%. Sequential growth was exceptionally strong at 3.1% QoQ seasonally adjusted. •The exceptional growth performance was mainly driven by strong exports, with net exports contributing a significant 5.77pptstooverall growth, marking the largest contribution since 2008. However, domestic demand such as investment and consumptionshowed signs of deceleration. •We are now forecasting Taiwan real GDP growth at 5.6% in 2025 and 2.4% in 2026. This upward revision from the April outlook isprimarily driven by stronger exports; we now expect 22% export growth in 2025. Upside potential could come from furtherincreases in AI-related semiconductor demand, including those related with the relaxed restrictions by the US on high-end chipsales to mainland China. Downside risks may arise from the negative effects of additional tariffs. Exports thrives on AI, and US tariff’s impact will likely be limited •The primary factor of robust exports was strong demand for AI chips, with semiconductor exports leading the growth. Thesesemiconductors were primarily shipped to the U.S. and mainland China, fueled by rapid AI advancements in these markets, aswell as to ASEAN countries, likely due to supply chain relocations. •Exports remained resilient at 34% in August, despite the 20% universal tariff. Looking ahead, the tariff impact is expected toremain limited, as Taiwan will likely be exempted from semiconductor sector tariffs due to investment pledges in the US. Anyremaining risk from undecided pharmaceutical tariffs is minimal, as they constitute less than 0.1% of Taiwan's total exports. Consumer inflation moderated, as consumptionandincome growth softened •Headline CPI and core CPI have remained below 2% for three consecutive months, despite a mild rebound due to one-off shocks(typhoon weather and railway price hike) in August. •It is in part led by the softened consumption. Private consumption further slowed to 0.56% YoY in Q2, compared to 1.36% in Q1,contributing merely 0.26ppt to overall growth. The weak consumption was likely owing to the limited pass-through effect fromstrong exports and production to employee income, that monthly earnings only rose by 2% YoY in the first five months. •Meanwhile, other favorable fundamentals persist: consumer goods inflation is anticipated to stay subdued, indicated by low PPIinflation; and cooling property markets suggest housing prices will likely fall. Property sector continued to cool down, and investment also slowed Credit to companies •The property market has been on a track of cooling down since the tightening of credit.Sinyihousing price growth turnednegative (-0.12