August trade data remained disappointing. Exports contracted 14.8% (YoY) in dollar terms, worse than the -11.9% in Jul15. Admittedly, the weakness in headline numbers was partly caused by the high base in the year-ago period. But even measured on the MoM basis, the external trade conditions didn't improve - the value of exports only moved sideways, falling 0.6% in Aug15 after rising 0.8% in Jul15. It is also worth highlighting that the shipments of electronics products declined 11.4% (YoY) in Aug15 (-1.6% MoM). This dampens the hope for a seasonal rebound in the electronics sector in 2H15.

With exports falling -8.5% on average in the first eight months of this year, the full year numbers should also be about -9%, the first negative reading seen since 2012. It is true that the appreciation of the dollar and the fall in commodity prices have distorted the USD-denominated export values. But this doesn't alter the reality that the underlying exports demand has deteriorated. Excluding the currency and price factors, we reckon that real exports grew only marginally so far this year, by 0.6%.

From the perspective of external balance, trade surplus remained strong in Aug15 (USD 3.96bn), providing support for the FX liquidity supply and strength of the TWD. That said, given the backdrop of sluggish economic growth, possibilities of monetary easing in Taiwan and monetary tightening in the US, capital outflows from domestic investors would continue to increase going forward and put depreciation pressures on the TWD.