Taiwan M&A activity hits 15-year low as US-China trade war rocks business climate

South China Morning Post Dipublikasikan 04.08, 22/08/2019
Taiwan M&A activity hits 15-year low as US-China trade war rocks business climate

Merger and acquisition activity in Taiwan has hit a 15-year low as the US-China trade war and global recession fears have spooked investors who fear the business climate is deteriorating.

According to data by Dealogic, the number of M&A deals so far this year dropped 42 per cent from the same period in 2018 to 71 while the transaction value of US$2.5 billion was the lowest since 2004.

Ongoing trade tension between the world's two largest economies and a global economic slowdown have worsened investment sentiment, the data provider said.

It predicted that the full-year M&A activities on the island would slump to a 10-year low.

For the whole year of 2018, total M&A transactions in Taiwan were valued at US$9.3 billion, up 30 per cent from a year earlier, according to data from Refinitiv.

The transaction value of US$2.5 billion year to date represented only 27 per cent of last year's total.

Taiwan-targeted M&A deals reached a peak in 2015 with transactions worth US$15.9 billion concluded that year.

Investment remained stable between 2016 and 2018 before a sharp decline occurred in 2019.

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Mainland China is a close trading partner with Taiwan, and its tit-for-tat trade war with the US has caused a ripple effect to the self-ruled island.

On August 1, US President Donald Trump threatened to impose tariffs on US$300 billion of Chinese goods from September 1, just one day after a meeting between top trade negotiators ended in Shanghai.

China's economy expanded 6.2 per cent in the second quarter of this year, the weakest quarterly growth since record-keeping began in 1992.

"As demand from China's mainland drops due to the trade war and the slowing national economy, investors have reasons to be worried about Taiwan's business outlook given its close trade ties with the mainland," said Han Haifeng, chief executive of Shanghai New Era Printing, a packaging firm that supplies companies that engage in export-import businesses between the mainland and the island.

"It will take a while before investors regain their confidence in the mainland and Taiwan economies."

Dealogic said that not a single Taiwan-targeted deal whose transaction value surpassed US$500 million had appeared during this year's first eight months.

As the US-China trade war shows signs of escalation, economic analysts cautioned investors to be prepared for a prolonged economic fight between the world's two largest economies.

In a typical case, additional US tariffs imposed on Chinese mainland-made goods would result in a drop in exports to the US market, thereby decreasing the purchases of materials such as semiconductors and electronic parts from Taiwan.

Semiconductors and electronics have been the backbone of Taiwan's M&A activities.

At the end of July, Beijing banned solo travellers in 47 mainland cities from visiting Taiwan, five months ahead of Taiwan's presidential election in January.。

The ban could lead to 700,000 fewer arrivals over the next six months and cost the self-ruled island NT$28 billion (US$893 million) in lost revenue.

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