Taiwan tech stocks are a leading indicator for trade figures in ASEAN

Taiwan plays a critical role in global semiconductors, hosting many of the world's leading fabrication facilities. But the ASEAN nations have been effectively integrating themselves into the industry's global value chain. (For example, Penang is emerging as a semiconductor hub, as we wrote recently in a series of charts on Malaysia.)

These trade relationships have become so enmeshed that we can get an early read on official export data by watching a high-frequency source of information in real time: Taiwan's stock market -- specifically, its electronics index, which contains well-known global players like TSMC. These stocks have reflected real-time information about chip gluts, pandemic-era shortages and the current red-hot demand for AI semiconductors.

Our first chart demonstrates the trade correlation by visualizing the TAIEX electronics sector subindex, courtesy of Exchange Data International (EDI), and adds exports for the ASEAN-5 nations.

Our electronics index tends to peak and bottom out at least a month before actual trade data is reported for Malaysia, Singapore, the Philippines, Vietnam and Thailand -- providing observers with a strategic advantage.

There are other good correlations out there: as illustrated in the second chart, the 6-month outlook for Taiwan's manufacturing purchasing managers index (PMI) is another robust indicator for the electronics cycle. And it closely tracks the movements of the stock market. However, the stock market's higher frequency offers a more timely gauge of sentiment.

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