Mon, Jun 10, 2019 page16

• Investment to boost non-tech sectors

  • By Chen Cheng-hui / Staff reporter
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  Non-tech sectors such as construction, banking and retail are expected to benefit from Taiwanese companies moving their production lines home, Yuanta Securities Investment Consulting Co (元大投顧) said in a report on Wednesday.

  Due to US-China trade tensions, Taiwanese businesses have as of last week invested more than NT$369 billion (US$11.74 billion) in Taiwan since the beginning of this year, Ministry of Economic Affairs data showed.

  The ministry has said that, as the investments have surpassed the government’s initial goal of NT$250 billion, the government has raised the target to NT$500 billion for this year.

  “This should provide more domestic job opportunities and, in turn, a likely increase in domestic consumption. Overall, we expect the banking, construction, food and retail store sectors to benefit the most,” Yuanta analysts led by Peggy Shih (施姵帆) said in the report.

  In the banking sector, lenders’ loan books grew 5.3 percent in the first quarter, 3.1 times more than Taiwan’s GDP growth of 1.72 percent over the same period, while land financing increased 9 percent year-on-year to NT$1.9 trillion in April, Yuanta said.

  “Taiwanese banks are likely to benefit from increasing loan demand [from companies] transferring plants from China to Taiwan or the ASEAN market,” the analysts said.

  Hsinchu Science Park (新竹科學園區), Central Taiwan Science Park (中部科學園區) and Southern Taiwan Science Park (南部科學園區) are three main places where Taiwanese businesses are expected to build new plants and factory offices, ministry data showed.

  Land deals in the January-to-March period totaled NT$61.3 billion — the highest in 33 quarters and nearly double that of a year earlier — which Yuanta analysts attributed mainly to demand for plots on which to build plants and factory offices, the report said, citing data from property consultancy Cushman & Wakefield Taiwan.

  The return of Taiwanese investment is likely to boost employment and salaries, which would stimulate domestic consumption and thus benefit companies in the retail and transportation sectors that focus mainly on the domestic market, the report said.

  Due to uncertainty from the US-China trade dispute, global sports brands intend to transfer orders to companies with less capacity in China, Yuanta analysts said, adding that they have for years already been reducing production in China and increasing production in Vietnam.

  “Taiwanese textile and shoe makers could benefit from the transfer of orders from China to the ASEAN market, as most of their factories are in ASEAN member economies,” the analysts said.

  The cement sector, which depends more on domestic supply-demand dynamics, should only be affected in a minor way by the trade dispute, and the bicycle sector would likely not be affected, due to it having sufficient capacity in Taiwan and robust e-bike sales growth in the European market, the analysts said.

  However, the trade dispute is bad for Taiwanese auto parts suppliers, the report said.

  “The tariffs imposed in 2018 has depressed not just consumers’ willingness to purchase new cars, but also the profit margins of original equipment manufacturers, as well as tier-one and tier-two suppliers,” Yuanta analysts said. “We believe this is partly due to pricing pressure from original equipment manufacturers, which forced parts suppliers to cut their average selling prices more than usual.”

  The trade dispute might increase the time it takes for the auto industry to recover, the analysts said.
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