Growth To Moderate From 31-Year High

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Taiwan's economy posted a stellar 13.3% y-o-y expansion in Q110, and we see room for further expansion in the coming quarters. We therefore revise up our 2010 real GDP growth forecast for the island to 5.9% from 5.0% previously. However, we caution that the pace of expansion will now moderate considerably, while we see a Chinese property slump weighing heavily on the Taiwanese economy through 2011. Furthermore, a significant chunk of our upward revision to growth is attributable to faster than expected inventory restocking - a one-time dynamic - and we therefore concurrently revise down 2011 growth from 3.4% to just 2.8%.