The persisting COVID-19 pandemic would dampen local tech firms’ business outlook for the rest of this year, when benefits from remote learning and teleworking would fade away, Taiwan Ratings Corp (中華信評) said yesterday.
Taiwan Ratings, the local arm of S&P Global Ratings, stood by the forecast that Taiwan’s economy would contract 1.2 percent this year, as it cannot stay above the global recession, although it has reined in the virus outbreak without draconian lockdowns.
“Rush orders for laptops and other devices would dry up in the second half of the year, when relief programs around the world would expire, allowing poor economic fundamentals to set in,” corporate credit analyst Raymond Hsu (許智清) told a media briefing in Taipei.
Virus infections continue to spike in the US, Europe and parts of Asia, dimming the chance of a high sales season for technology products, Hsu said, expecting solid declines in sales of PCs, smartphones, servers and information technology spending this year.
The pandemic and lingering US-China trade tensions force diversification of manufacturing facilities and drive up production costs, Hsu said, referring to Washington’s blacklisting of Chinese tech giant Huawei Technologies Co (華為).
Taiwanese firms on Huawei’s supply chains would also take a hit, but might come out of the woods after gaining new customers, Hsu said.
If Apple Inc takes over Huawei’s market share, local firms would emerge unscathed, as many collaborate with the US technology titan, he added.
However, it would be a different story if Samsung Electronics Co grabs more market share, which would benefit South Korea’s supply chains, Hsu said.
Regardless, the virus crisis is lending support to digitalization and accelerating investment in cloud computing and 5G infrastructure, which would provide the catalyst for a recovery next year, he said.
Local banking institutions could see their return on average assets decline to a 10-year low of 0.3 percent this year due to increasing credit costs, doubled bad loans and lower interest rates, financial credit analyst Serene Hsieh (謝雅瑛) said.
Central banks worldwide have cut interest rates to ward off a credit crunch and asked lenders to support companies affected by the outbreak, squeezing the room for profitability, Hsieh said.
The credit outlook is gloomier for domestic life insurers, as low interest rates would constrain investment yields, foreign-exchange costs would weigh on earnings and negative interest spreads would deteriorate, she said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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