Mon, Oct 02, 2017 - Page 15 News List

Smartphone fatigue afflicts Asia’s bumper export year

‘END OF THE UPSWING’:While trade slows as consumers weary of upgrading their phones, there is more to the Asian economy than the iPhone, one economist said


The rush to upgrade smartphones may be ebbing, prompting economists to dial back the outlook for Asian exporters.

Early indications, including signs of disappointing orders, point to a mixed reaction to the latest iPhones, hurting the share prices of Apple Inc’s Asia-based suppliers. Given that smartphone improvements help power demand for electronics components from supply-chain powerhouses such as Taiwan, South Korea and Japan, a weaker upgrade cycle would have macro-economic implications too.

The weakening “smartphone effect” is not the only reason economists are sensing a peak in this year’s better-than-expected trade performance in Asia. Other threats include forecasts that China’s economy is slowing again and the shift by some developed-world central banks away from years of extraordinarily easy money.

“It feels like we are toward the tail end of the upswing at a time, ominously, that the other key driver of Asian exports — China — is showing signs of resuming its economic slowdown,” said Rob Subbaraman, chief economist for Asia ex-Japan at Nomura Holdings Inc in Singapore.

In the year to date through August, Asia’s exports have been the strongest in US dollar terms since 2011, according to economists at Morgan Stanley.

South Korean exports of semiconductors jumped 70 percent last month, owing to the release of new phones and increases in DRAM capacities. There are other signs that Asia’s trade recovery is starting to cool. China’s year-to-date exports are up 7.6 percent, but growth slowed to 5.6 percent in August and imports are showing signs of consolidating. And some analysts say South Korea’s impressive export growth rates could soften in coming months as a weak performance last year is no longer the base for comparison.

Slipping activity at major Asian ports are among indications that a recovery in the container trade may have peaked, according to economists at Bloomberg Intelligence.

To be sure, few are predicting trade will slump, particularly in the near term. Klaus Baader, chief Asia-Pacific economist at Societe Generale SA, says Asia’s trade recovery goes beyond smartphones and China. New drivers will include an expected acceleration in business investment, especially in electronics and software, which would have knock-on consequences for Asian manufacturers, Baader said.

“There is a lot more to the Asian electronics trade than just the iPhone,” he said.

Some of the gloss on Asia’s export performance is bound to come off as volumes next year are compared to the stellar performance this year, the WTO warned last week. It upgraded its estimate for growth in global merchandise trade volume this year to 3.6 percent from 2.4 percent, due in large part to Asia’s robust performance.

Expectations for tighter monetary policy in the US and Europe along with China’s push to rein in credit growth will weigh on trade growth next year, the WTO said. Geopolitical risks such as tensions with North Korea and trade disputes between the US and its large trading partners could also derail the Asia trade story.

That all points to reason for caution, Subbaraman said.

“‘Enjoy the party, but stay close to the door’ is my mantra,” he said.

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