Taiwan Stock Market Hits New High As Economy Performs Best Since 2010

The Taipei 101 tower, once the world's tallest building, and the Taipei skyline, in Taipei, Taiwan, on Jan. 7, 2020. (Carl Court/Getty Images)

Taiwan’s stock market continues to set new highs to greet the new year, jumping more than 300 points, or 1.6 percent, in the first two trading days of 2022, after surging by 23.6 percent in the whole year of 2021. This comes as exports and investments have fueled Taiwan’s best economic outlook since 2010.

Amid concerns over the pandemic, and lingering tensions between the United States and China, global investors were bearish on Taiwan. Foreign institutional investors sold a net $16.4 billion worth of Taiwanese shares in 2021, following a $19.5 billion net outflow the previous year.

Nonetheless, as the economy improved, local investors hurried to fill the void, driving the benchmark stock index higher during the last two years.

In comparison, Hong Kong’s Hang Seng Stock Index sank by 16 percent in 2021, and its China Enterprises Index plunged by 24 percent.

“The most significant momentum for revitalizing Taiwan’s market is the growing number of businesses reshoring to Taiwan,” reported local media BusinessToday, citing prominent financial publisher Hsien Chin-ho.

As of the end of December 2021, 1,144 Taiwan-based manufacturing companies have been restoring production to Taiwan since the reshoring campaign initiated in July 2019, with a total investment amount of $65 billion, according to the Ministry of Economic Affairs.

In particular, reshoring production lines back from China has had a significant effect. These businesses contributed $37 billion of the above investment and created over 80,000 new jobs.

The self-ruled island is experiencing its fastest economic growth in more than a decade, said the National Development Council (NDC) on Dec. 27, 2021, as an index evaluating the economic climate has shown a blooming sign for ten months in a row.

“Taiwan’s economy continues to benefit from strong exports and solid investments,” Wu Ming-hui, head of the NDC’s Economic Development Department, told reporters in a briefing.

“Many semiconductor firms appear willing to invest more since they remain optimistic about demand,” said Wu, adding that semiconductor equipment imports rose 36 percent year on year in November.

Taiwan’s exports are a bellwether of demand for global tech giants such as Apple Inc. The island is a major producer of semiconductors, a global shortage of which has rattled industries like automakers and boosted Taiwanese corporate profits.

November exports reached a new high of $41.58 billion, setting a monthly record high for the fifth consecutive month.

Officials are increasingly bullish about exports, raising 2021’s full-year growth forecast to 16.75 percent from a year earlier, according to the Directorate General of Budget, Accounting, and Statistics (DGBAS).

Another significant growth driver for 2021 is capital investment, with DGBAS forecasting a nearly 19 percent increase in real private fixed capital formation.

Taiwan’s central bank raised its 2021 estimate for gross domestic product (GDP) growth rate to 6.03 percent, a record high since 2010. The bank forecasted 4.03 percent GDP growth in 2022 and said it will likely tighten monetary policy by raising interest rates.

The Taiwan dollar benefited from the self-ruled island’s export performance as well. It became Asia’s strongest currency in 2021 as appreciating around 3 percent against the U.S. dollar, higher than the Chinese yuan’s 2.7 percent rise; while the South Korean won shed about 8.6 percent, and the Japanese yen tumbled by more than 10 percent.

The London-based think tank Centre for Business and Economic Research (CEBR) poised Taiwan the 20th largest economy in the world by 2026, according to its report (pdf) dated Dec. 26, 2021.

However, the move was not as significant as might appear at first glance. According to the report, Taiwan was already the 21st largest with a GDP of $668.5 billion in 2021.