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While the world has been watching US regional bank marked-to-market assets relative to deposits, another indicator has been moving decisively into critical terrain. Electronic exports, particularly the crucial semiconductor sector, from South Korea and Taiwan are at levels last seen through the Global Financial Crisis.
South Korean exports of semiconductors were down 42.5 per cent year on year in February. Taiwanese electronics exports fell 22 per cent for the same period.
Economic data from South Korea and Taiwan are important indicators of the state of the world economy. Both countries publish a good amount of data with long time series, which can be used as a benchmark for global demand.
South Korea is a major exporter of cars, machinery and steel. Taiwan is a leading exporter of semiconductors and electronics.
Overall exports for South Korea were down 7.5 per cent in the year to February, while Taiwan’s exports fell 17 per cent over the same timeframe.
Exports are not the only indicator of tough economic times. Purchasing manager surveys in both countries show expectations of contraction. Korean industrial production in January showed a disappointing 12.7% contraction, while Taiwan’s industrial production fell 10% in February to be down 21% year on year.
Challenges on the supply-side are reflected in the demand picture. There's some hope that AI products like ChatGPT will lead to demand for server hardware, but if you look at the startup ecosystem, if you look at demand for tech hardware for crypto mining, and if you look at job moves from the global scale players like Amazon, Microsoft, Google and Netflix, it looks difficult.
If South Korea and Taiwan are unlikely, in our view, to lead a resurgence in emerging markets, other regions look very different. India and Indonesia remain positive and China is in recovery. Mexico remains our favourite market. There’s an enormous shortage of people in the US who are both able and willing to drive trucks and serve food and clean and build things — that it is an enormous opportunity for Mexico, which is a supplier of people who can do that.
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