Chung-Hua Institution for Economic Research (中華經濟研究院大砍) today cut its economic growth forecast for this year by nearly half to 1.36%, CNA reported. This would be the second-lowest level of economic growth for Taiwan since the 2008 financial crisis, with 2015 seeing only 0.8% growth with per capital GDP shrinking slightly (according to Focus Economics). The previous forecast was for 2.24% growth.
The institute said that domestic demand is contributing to the economic growth, compared to negatively affecting growth last year. However, domestic demand remains weak and the overall global economic environment has dragged the forecast lower.
Despite a slight rebound in oil prices and recent rallies in the Dow Jones, the TWSE fell by more than 1.3% today to 8,517.74. The exchange opened higher but soon reversed course on negative forecast revisions for the year and negative investor sentiment. There is also fear that second quarter earnings may be worse than previously expected, led by speculation of declining sales of Apple’s iPhone which pushed related stocks, such as Hon Hai Precision (down 2.8%), lower on the day.
Tech stocks were dragged by news of Intel’s planned layoffs as well as expectations of a further declining PC market, for which many Taiwanese tech firms are suppliers, as IBM reported a 22 decline in computing hardware sales on Monday.
Losers among tech stocks included TSMC, which fell by over 2%, Quanta Computer, which fell 2.6%, and Advanced Semiconductor Engineering, which fell more than 2.5%. However, HTC bucked the trend and gained over 5% on news that would expand its footprint in virtual reality with positive reviews for Vive as well as the recent launch of the HTC 10.