Market Overview

Taiwan Enters Recession As China's Industrial Sector Is In Freefall

Taiwan Enters Recession As China's Industrial Sector Is In Freefall
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  • Taiwan’s economy has slipped into a recession.
  • China's latest manufacturing numbers also fell short of market expectations.
  • Morgan Stanley believes that the Chinese government will likely continue its easing measures to stimulate employment growth.

It seems that economic conditions in Asian have gone from bad to worse. The latest numbers out of Taiwan confirm that the country has slipped into a recession. Perhaps much more disturbing for the global economy, China's November PMI came in lower than market expectations, indicating that weakness in China's industrial market is worse than many had feared.

Taiwan's Export Problem

Taiwan's 0.3 percent economic contraction in the most recent quarter followed a 1.1 percent contraction in the previous quarter. About 60 percent of the country's economy is comprises of exports, which have been on the decline ever since April.

The country's budget office projects that Taiwan's economy will get back on the right track in 2016, growing 2.3 percent.

Related Link: It Might Be Time For China ETFs Again

China's Manufacturing Problem

Chinas NBS manufacturing number fell to 49.6 in November, short of consensus expectations of 49.8. In addition, the input price sub-index fell 3.3 percent in November to 41.1, its largest monthly decline in nearly two years. The weakness was likely due to a combination of low commodity prices and sluggish aggregate demand growth.


Global investors are understandably concerned about the fallout from the newest numbers out of Asia. According to Morgan Stanley analyst Junwei Sun, the lackluster manufacturing numbers likely mean weak employment growth in China.

"We expect policy makers to keep up the easing efforts to defend the potential further growth slowdown," he explained.

The iShares FTSE/Xinhua China 25 Index (ETF) (NYSE: FXI) is down 9.5 percent in 2015, while the iShares MSCI Taiwan Index (ETF) (NYSE: EWT) is down 10.6 percent on the year.

Disclosure: the author holds no position in the stocks mentioned.

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