Taiwan and South Korea, two of Asia’s most tech-heavy economies, are facing an uphill battle in trying to stem losses in some of the world’s worst-performing assets this year.
The two countries are hit particularly hard by a global growth slowdown and US chip restrictions.
Authorities are stepping up actions, including introducing curbs on short selling, readying market stabilization funds to buy assets and intervening in currency markets in moves reminiscent of the early days of the COVID-19 pandemic.
Photo: EPA-EFE
While markets everywhere have seen gut-wrenching moves in reaction to accelerating inflation, aggressive central bank rate hikes and a soaring US dollar, Taiwan and South Korea look especially vulnerable among major economies. Both are highly dependent on exports for growth, and are swayed by global demand for chips. Adding to their woes is the impact of new US curbs on supply chains linked to China’s semiconductor industry.
The interventions have not stopped the declines. Taiwan’s equity benchmark has dropped about 8 percent since a support fund was activated in July, and South Korean shares were down 11 percent in the past two months, leaving stock gauges in the two markets more than 25 percent lower this year.
The New Taiwan dollar and the won are also among the biggest losers in the world against the greenback this year to date.
Photo: Tyrone Siu, Reuters
“These stabilization measures are intended to buy enough time until the tech cycle bottoms out and foreign investors return,” Modular Asset Management Pte Ltd strategist Wai Ho Leong (梁偉豪) said. “Turning markets around is a different matter.”
In Taipei, the central bank last week warned of “severe economic challenges” for next year, while South Korea recorded its longest string of trade deficits since the 1997-1998 Asian financial crisis.
Amid these headwinds, analysts have cut their earnings estimates for South Korea’s SK Hynix Inc and Samsung Electronics Co to the lowest in more than two years.
While the chipmakers have won approval from the US to keep ordering US equipment for their plants in China for one year, concerns swirl around their business models as the US seeks to curb China’s self sufficiency and advancement in military capabilities.
A recessionary environment in the West and China’s “zero COVID-19” policy are also having knock-on effects.
South Korea’s chief economic policymakers, including the central bank governor and finance minister, were to meet yesterday to look into ways to calm the local credit market, the South Korean central bank said in a text message late on Saturday.
The meeting scheduled at about midday was the highest-level policy discussion since yields surged to decade-highs and default risks spread, prompting authorities to revive a 1.6 trillion won (US$1.1 billion) bond stabilization fund earlier this month.
“In the near term we remain cautious on Asian stocks, in particular on stocks or equity markets that are exposed to external growth, such as Korea,” and tech hardware firms, Nomura Holdings Inc strategists including Chetan Seth wrote in a recent note.
Taiwan Semiconductor Manufacturing Co (台積電) and Samsung account for the biggest weights on the TAIEX and South Korea’s KOSPI respectively.
Taiwan and South Korea are not alone in supporting markets.
Japan has intervened in the currency market to stem the yen’s decline, but it failed to prevent the currency’s plunge to a 32-year low. China is easing restrictions on mutual funds’ purchases to back its plunging stock market.
To be sure, slumping valuations in Taiwan and South Korea are proving attractive for some, and could spark short-term relief rallies.
Foreign investors snapped up South Korean shares for 13 straight days this month, and Morgan Stanley is among the outliers calling an end to the underperformance of Asian technology stocks as it sees most risks as priced in.
Others remain skeptical that the export-reliant economies would pick up anytime soon, and some favor Asian markets that are backed by strong domestic demand and a revival in tourism, such as India and Indonesia.
“It’s going to be a long winter and these support measures will probably not be enough,” said Ken Peng (彭墾), head of Asia investment strategy at Citigroup Inc’s private banking arm, referring to actions from Taiwanese and South Korean authorities. “A recovery will likely have to wait until the USD peaks and rolls over, likely when non-US growth is expected to recover.”
Shiina Ito has had fewer Chinese customers at her Tokyo jewelry shop since Beijing issued a travel warning in the wake of a diplomatic spat, but she said she was not concerned. A souring of Tokyo-Beijing relations this month, following remarks by Japanese Prime Minister Sanae Takaichi about Taiwan, has fueled concerns about the impact on the ritzy boutiques, noodle joints and hotels where holidaymakers spend their cash. However, businesses in Tokyo largely shrugged off any anxiety. “Since there are fewer Chinese customers, it’s become a bit easier for Japanese shoppers to visit, so our sales haven’t really dropped,” Ito
The number of Taiwanese working in the US rose to a record high of 137,000 last year, driven largely by Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) rapid overseas expansion, according to government data released yesterday. A total of 666,000 Taiwanese nationals were employed abroad last year, an increase of 45,000 from 2023 and the highest level since the COVID-19 pandemic, data from the Directorate-General of Budget, Accounting and Statistics (DGBAS) showed. Overseas employment had steadily increased between 2009 and 2019, peaking at 739,000, before plunging to 319,000 in 2021 amid US-China trade tensions, global supply chain shifts, reshoring by Taiwanese companies and
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) received about NT$147 billion (US$4.71 billion) in subsidies from the US, Japanese, German and Chinese governments over the past two years for its global expansion. Financial data compiled by the world’s largest contract chipmaker showed the company secured NT$4.77 billion in subsidies from the governments in the third quarter, bringing the total for the first three quarters of the year to about NT$71.9 billion. Along with the NT$75.16 billion in financial aid TSMC received last year, the chipmaker obtained NT$147 billion in subsidies in almost two years, the data showed. The subsidies received by its subsidiaries —
Taiwan Semiconductor Manufacturing Co (TSMC) Chairman C.C. Wei (魏哲家) and the company’s former chairman, Mark Liu (劉德音), both received the Robert N. Noyce Award -- the semiconductor industry’s highest honor -- in San Jose, California, on Thursday (local time). Speaking at the award event, Liu, who retired last year, expressed gratitude to his wife, his dissertation advisor at the University of California, Berkeley, his supervisors at AT&T Bell Laboratories -- where he worked on optical fiber communication systems before joining TSMC, TSMC partners, and industry colleagues. Liu said that working alongside TSMC
RSS