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Home > Manufacturing > Fabrication > Building/Construction
Taiwan Infrastructure Report Q4 2008
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In light of the intensification of the financial crisis in developed markets (and beyond) in September 2008,we have revised down our forecast for real growth in Taiwan's construction sector next year. Indeed, withthe effects of the global credit crunch feeding through to corporate liquidity and investment, private sectorconstruction will have a difficult year next year in Taiwan, as in many other countries around the world.As such, we now predict that real growth in the construction sector will register 2.4% in 2009, comparedto our previous forecast for next year of 5.3%. This is on the back of a robust prediction of 7.5% for realconstruction growth in 2008. Public sector investment should provide some measure of support forconstruction next year, with the government announcing a US$5.6bn fiscal package in mid-September2008, around a third of which will be devoted to infrastructure spending (the rest will go to tax cuts andother measures designed to support the economy during this challenging time). This government supporthelps to keep our sector growth forecast for construction next year in positive territory.The external threat generated by the financial crisis in developed markets is the main risk factor, withmuch depending on how prolonged the crisis is and how long corporate borrowing rates remain atprohibitive levels. In the worst case scenario, a prolonged recession in the US and elsewhere wouldseverely crimp Taiwan’s export growth, GDP growth and government revenues, with attendantimplications not only for commercial construction in the country, but also public investment andinfrastructure tenders.
We take a detailed look at Kung Sing Engineering and BES Engineering, examining their vulnerabilityto an economic slowdown induced by the crisis in global financial markets. Given strong reliance onpublic sector contracts and the Taiwanese government's announcement of a fiscal stimulus package inSeptember 2008, the outlook for both firms is relatively supportive.
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