Leaving on a jet plane

 - --- All my bags are packed and I'm ready to go,

       I'm standing here outside your door.

       I hate to wake you up to say goodbye.

      But the dawn is breaking, It's early morning.

      The taxi is waiting, he is blowing his horn,
      Already I'm so lonesome.

      So kiss me and smile for me, tell me that you'll wait for me.

      Hold me like you'll never let me go,
      Cause I'm leaving on a jet plane.

      Don't know if I'll be back again, oh babe I hate to go. ----

                  Quoted from lyrics of song – Leaving on a jet plane

                  Written and performed by John Denver

I am not leaving my blog, though. I still want to practice writing in English.

Taiwan Airliners – Phoenix Flying out of Ashes

Patience was finally rewarded toward Taiwan airliners whose rehab efforts paid off significantly last year, in which a record high of nearly 30 mn people traveled to or from Taiwan, 19.5% more than in 2009.

In terms of tourism trip, about 57% of the 9.42 mn outbound trips by Taiwan citizens started with travel to China in 2010, while 14.6% went to Japan. Total tourists visiting the island hovered to 4 mn in 2009, jumping to 5.57 mn in 2010, and hoping to top 6.5 mn this year. It is worth a notice that Chinese tourist arrivals mushroomed rapidly since both sides inked a tourism agreement in July 2008. Last year , 1.63 mn Chinese tourists flew to Taiwan, up an annual clip of 68%. Taiwan has boosted daily quota for incoming Chinese tourists to 4,000 persons from 3,000, and may raise it to 5,000. An upcoming greenlight to allow individual Chinese to travel around the island will add boon to the airline industry.

The increased air traffic enabled two major int'l airliners based in Taiwan, China Airlines (CAL) and EVA Airways, to perform like a phoenix rising out of ashes last year, in which CAL registered NT$138 bn in sales, up 40% YoY, and EVA posted NT$104 bn, up 42%. Their margins in net profit, ROA and ROE as a whole bounced back to the black as of Sep. 2010. Under the breakdowns, CAL raked in 10.20%, 2.01%, 7.57% gains: while EVA, 20.39%, 4.12%, 14.33%. Their respective EPS took off for the banner 2010, as CAL hauled in NTD3.01 versus a yearly loss of NTD1.04 in 2009; and EVA, NTD4.82 from a loss of NTD1.14. The results were deemed heady, especially after together suffering red inks from 2007 to 2009 in a row.

At present, there are 370 direct flights per week across Taiwan Straits, a number said to be far shy of demand. Additional destinations to China cities will be inaugurated to capitalize on the bumper cross-strait tourism, in a hopefully blistering pace to stave off the headwinds the two airliners will likely run into in 2011–firmer fuel prices and relatively higher comparable bases in earnings.

As much as 2 mn Taiwanese currently have presence there, and of course will return to the island but mostly for festival holidays. To flee the island aiming for bonanza in China will speed up, affected by the already-effective ECFA and the Free Trade Agreement between China and SE Asian countries. With this tariffs advantage, relocation idea and attempt to tap coastal, or hinterland China markets have been unanimous by Taiwan makers of all stripes apparently rushing to jump on the bandwagon. More business trips will benefit the aviation operators in the long haul, making them deserve a status to head the watch list for “buy on dips”, though a problem of capacity shortage remains.

Inflation – Elephant in The Room ?

The specter of import-driven inflation has spooked Taiwanese, as 70% of their consumption is supported by imports. Global food crisis and spiraling commodity prices were blamed for a proposed 8% hike by state-run Taiwan Sugar for its own-brand lineups’ price tags. The move, reportedly forced to be taken begrudgingly earlier but waived afterwards, is much expected to ignite a land mine, bringing about an unavoidable across-the-board  price pickup in fuel and foodstuff.

The government initially responded with a muted note, overlooking that as an elephant in the room, given the fact that the CPI growth rate in Jan. perched at its comfort zone below 2%, sliding 0.01% MoM and climbing 1.11% YoY. Government also urged end-users to coordinate to ward off the inflation woes, wording it had worked to counterattack by whittling down the import tariffs for wheat, flour and milk products for a 6-month period. Further, a withering USD was witnessed to be welcomed to warrant a weakening import cost.

News came as a surprise on late Thursday night that waves of criticism pressed the cash-rich sugar producer, which stashed NTD12.7 bn profit on its bottom line last year, to scrub the plan. The shift of policy earned it an applause. However, a whiff of fresh inflation momentum has been  spread islandwide, following words from another profitable state-run enterprise, China Petroleum, not to freeze its fuel prices. Food makers and bakeries have found it difficult to pass along rising cost when needed to retain their shoppers. In some cases, a mildly growing inflation means an economy is out of the woods, as funding demand is pushed higher. But the phenomenon is not arriving at Taiwan door at the moment yet.

The government still mulls a payroll hike for public servants who might think the inflation worry is simply a small fly on the ointment. Generally speaking, the widening inflation pressure will whack the most the well-being of the financially-squeezed, debt-ridden underprivileged, and the employed who failed to get a lift in wage these few years. Taiwan can not shun worldwide mounting inflation alone, but to probe importers’ illegal hoarding of commodity is necessary. Plus, a stipulated rule requiring state firms in existence to stabilize retail prices must be fully carried out. Said by people: "There is no time like the present living condition worsening by a sweeping outburst in the inflation of entire supply chian, except wage."

Even worse, people are situated to meet a creeping-up of new premium rate by Taiwan National Insurance Pension Fund, which covers those not insured by major national benefit, security systems, from 6.5% to 7% applying from Apr. 1, 2011. The total premium will ascend by NTD4 bn, sourcing from 3.9 mn people who are vulnerable to inflation spike. The increase, so to speak, is designed to help wipe out deficit of national coffers partially. Outstanding national 12-month-plus debt rocketed sharply in Jan. to NTD4,578 bn, up by a whopper NTD105 bn from last Dec. and marking averaged debt burden of NTD208,000 per capita. Currently, a number of 3.6 mn Taiwanese whose monthly income stands below NTD30,000. Among them 1 mn received less than NTD20,000 each month, a threshold for barely getting their heads above water.

The net number of new plants reached 342 in 2010, a turnaround from the declined number of plants by 1,316 in 2009 and 489 in 2008. It is good news anyway. But, when local business activities resumed on Feb. 07 after lunar new year holidays, filings for job searching with an on-line site vaulted tenfold to 80,000 cases from an prior averaged daily level. The most available vacancy positions were seen in non-tech sectors - catering services and marketing. The reported pile-ups coincided with official upbeat release that domestic job chances far eclipsed demand. As a race to look for a job heated up, things are  certain that Taiwan fertility rate landed into a record low last year along with a whimper among the poor already.

Taiwan Stock Market – Bears on The Prowl

Taiwan stock market headed for a stumbling start after reopening Tuesday, whipsawed by a drastic selling frenzy. Optimism waned so unexpectedly, in a sharp contrast to pre-holidays, broad-based wish for anther winning streak to revisit the widely-watched 10,000 mark. Steep downdrafts by bellwethers both in electronics, fret over profit erosion by stronger local currency, and over-heated financials, sent investors packing. The extent of the downturn was in part accentuated by eagerness of local brokerage houses to execute sell orders placed for hedging actions against still-floating options. Foreigners hustled for the exits by dumping a net NTD42 bn these past four sessions. Local institutional traders also jumped the ships to wind up last week's wild trading at 8,609 points.

A short-lived technical rebound is due next week, only to form a distribution pattern around the 8,400 level. Trading will be light, so any data surprises, including a rerun of exodus by foreigners, could provide wider swings as bears seem to have retaken the dominance. Just say good-bye to the 10,000 points that may be reclaimed someday, if economic conditions warrant. Believing by government the glass is half-full and 2-year-long rally is bona fide is fine, but a possibly-downbeat bias in private spending and living cost make it a different story. The shockwave triggered by a weekly 536-point free-fall will have folks waver, wondering when bulls will wake up from their hibernations and which way the wind will blow in near future, both fundamentally and technically.

All on Board !

Here is what captains are speaking – "Welcome on boards of CAL and EVA airlines for destinations to China cities, and please fasten seat belts as turbulence will occur in the sky over the island that might encounter ballooning Taiwan makers' departures and volatility in stock market.”

If you are leaving on a jet plane for a flight away from Taiwan, please book the tickets of CAL and EVA to keep their fortunes afloat. In future, we should calmly wait for a return of the masses seemingly unwilling to depart earlier amid a lemming rather than crowded-out effect. They hated to go away from sweet homes for a lonesome journey, as I think. Truly to say, few will part with this beautiful island for a long while, will you? 

Good luck, and have a nice trip on vacations!

Here comes the Sun!

                                   ----- Here comes the sun, here comes the sun, and I say it's all right

                                            Little darling, it's been a long cold lonely winter

                                            Little darling, it feels like years since it's been here

                                            Here comes the sun, here comes the sun, and I say it's all right

                                           Little darling, the smiles returning to the faces

                                           Little darling, it seems like years since it's been here

                                           Here comes the sun, here comes the sun, and I say it's all right -----

                                                   Quoted from lyrics of the song – Here comes the sun

                                                   Written by George Harrison and performed by the Beatles 

Don’t get me wrong. I am not a weather reporter.

With the arrival of lunar new year of Rabbit, an animal said to be jumpy and skittish, stock investors are even placing bigger bets that the market will continue to shine, furthering its rise to grasp the psychologically-critical 10,000 mark on a bevy of positive news both domestic and overseas.

Claiming an extended run for 5th consecutive month in Jan, bulls seem to have long grabbed the upper hand as the market wrapped up the lunar year of Tiger at 9,145 points, a 32-month peak. Optimism is so rife that it can churn higher after resuming trading next Tuesday to repeat a traditionally marvelous feat. In the first outing for each of previous two lunar new years, investors rejoiced at upbeat numbers it achieved. 

Glass Is Half-Full: Improved Employment and Consumer Confidence

The glass is half-full, as voiced by Taiwan government expecting better time ahead for 2011. It opined that local economic recovery is taking on a finely-balanced, sturdy disposition both in export and domestic segments. An official also put a positive spin about Taiwan stock market described "more accurately" as a decently-undervalued laggard as compared with its global peers.

In 2010, the island clocked an upwardly-revised GDP rise of 10.47%, a double-digit high unseen since 1988, mainly due to the explosive export and industrial output last Dec. The GDP growth this year will be however pegged at a slower pace of 5.03%. Most notable prediction comes from a breakthrough to USD21,229 for Taiwanese annual per capita income, albeit the last one among Asian Four Little Dragons to hug a level over USD20,000. Also, healthier shape in global and emerging countries' economies, along with widely-watched enforcement of ECFA (a China-Taiwan free-trade framework agreement), will catalyze an extension of robust export.

As to domestic consumption, it is projected to soar 3.73% this year, up from 3.43% in 2010 and an evidence that economic pick-up is well in place. More people are anticipated willing to open their wallets to spend, partly on the back of improved unemployment rate which stood at 4.67% last Dec and is planned to be checked under 4.9%. A crop of 520.000 people are out of works at present, with the level programmed to be trimmed by 100,000 this year. There is some silver lining to the clouds of this beastly jobless figure as official data indicate the multiple of effective jobs supply over those qualified leapt to 1.3X from a low of 0.6X hit in global mortgage crisis couple years ago. The tide has altered, after latest tough years we've struggled through. Bravo !

A palpable sense of optimism pervaded among foreigners, who overall posted a net buy of NTD90 bn in Jan. They had raised targeted upside of Taiwan market index over the 10,000 mark in general. The most rosiest picture is to paint a muscular charge to 11,200 points. A heavyweight foreign house reportedly on Feb.10 is slated to realign again its index weighting covering emerging markets, with more added to Taiwan bourse. The shuffling, if finalized, is speculated to pump more-than-NTD100 bn into the island, a reassuring blessing to the market in the long run.

Concerns Remain: Annoying Inflation and Public Debt

The market’s more optimistic view is understandable, yet investors have to rethink their euphoria a bit. Domestic banking liquidity decelerated in Dec. when M1b money supply grew 8.77%, representing a 10th straight month of declines. That means the potential capital flow into market would have stalled. Inflation pressure, another prevailing bête noire of the jobless and low-income labor, will cast a pall over private sector spending. The CPI in 2011 is estimated to inflate 2.04%, up from a moderate 0.96% a year ago. A reading over 2% will strengthen the case for government to be vigilant and proactive, and that over 3% will carry implications that it will be forced to activate an austerity attitude at any moment.

Even the government survey finds employers set to bring on more full-timers, but, for the lucky, gainfully employed, wages seem likely to keep stagnant with odds for a hike perceived shallow in the immediate future. It has been severely criticized that real per capita disposable personel income in Taiwan was pushed back to the range 10 years ago thanks to unbearable inflation. The weakening buying power can't fuel or sustain any apparent snapback for private spending. Most of regional countries have been vexed by skyrocketing property prices, readying themselves for a foreseeable bubble pop, and Taiwan is not an exception.

Hopes are swirling that Taiwan exporters will enjoy a whopping windfall so long as implementation of ECFA, effective this year, moves as scheduled, though there might be bumps along the way. Both sides have slashed respective import tariffs to boost trade. Under the improved tie, there'll be some standouts, particularly financial issues which now scramble to venture into China to jockey for good positions. Notwithstanding the frenetic growth strides, Taiwan will face limited advance in tax revenue coupled with souring fiscal status, as articulated by Fitch Ratings Ltd which cut Taiwan long-term local-currency rating to AA- from AA on Jan. 27. As of Sep. 2010, outstanding debt of central government totaled NTD5,701 bn, translating into a portion of 42.16% over GDP and exceeding the officially-set uplimit of 40%.

Sell into Peak

Complacency currently looks high in Taiwan market which has long taken its cues from overseas markets. A prolonged bullishness in US market will likely act as a catalyst to prompt a push over the 10,000 points, but a wild card is related to portfolios pruning among foreign traders. In Jan. alone, they snapped up Taiwan shares in a net amount nearly equivalent to 16% of 2010 figure around NTD500 bn. Whether fully-loaded or not, they will take money off the table swiftly, once local currency, NTD, halts its appreciation, or the market starts to top out at which they predicted – higher territory over the 10,000 ground.

Taiwan market in the past cleared the 10,000 hurdle but only to witness sharp nosedives subsequently for three times, each in 1990, 1997 and 2000. The message we receive now from foreigners and government is: buy, buy, buy; here comes the sun on a big price spike. I am not always a doomsayer neither, but where there is a positive, there is a negative. How long can you suspect a market's ongoing rally, mainly driven by hot money, not to be tripped up amid a less-exciting 2011 outlook for economic growth? It won't come as much of a surprise for the government to descend a slope of hope in an island striving for lifting annual per capita income, and fixing the grim jobless and inflation displays. But can it finally pull a rabbit out of the hat to attain those ends?

Just adopt a risk-off approach, if you are a Johnny-come-lately missing last year party hosted by the jaunty, dancing Tiger that had already shown its claws. Then, smiles will be on your face.

Happy Lunar New Year, Good Luck, and Good Trading!