Taiwan's trade surplus narrowed from $4.79 billion in December to $2.34 billion in January. Exports fell 21.2 percent on the year after falling 12.1 percent previously, while imports fell 16.6 percent after a previous decline of 11.4 percent. PMI survey data published last week showed Taiwan's manufacturing sector contracted for the eighth consecutive month in January.

Exports of electronic components fell 20.1 percent on the year in December after dropping 1.3 percent in November, while exports of information, communication and audio-video products declined 10.4 percent after a fall of 10.7 percent previously. Exports to mainland China and Hong Kong were particularly weak, down 33.5 percent on the year after falling 16.4 percent previously, while year-over-year growth in exports to the United States dropped 14.5 percent after a previous fall of 2.6 percent. Petroleum imports fell 1.8 percent on the year after increasing 4.4 percent previously, while imports from mainland China and Hong Kong fell 26.9 percent, little changed from the previous decline of 27.0 percent.

The international trade balance measures the difference between imports and exports of both tangible goods and services. Imports may act as a drag on domestic growth and they may also increase competitive pressures on domestic producers. Exports boost domestic production. Trade balance values are calculated by deducting imports (cif) from exports (fob). The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade and can offer a guide to an economy's competitiveness.

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect currency values in foreign exchange markets.

Imports indicate demand for foreign goods and services in the local economy. Exports show the demand for local goods in countries overseas. Movements in the trade balance directly affect GDP growth because of Taiwan’s high reliance on trade. Stronger exports are bullish for corporate earnings and the stock market. The bond market is also sensitive to the risk of importing inflation.

This report also gives a breakdown of trade with major countries as well, so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.