Singapore’s June export rebound caps expansionary first half

SINGAPORE’S non-oil domestic exports (NODX), which rebounded in June after a surprise dip in May, are now on track to outshine the official forecast of a full-year contraction.

But, despite an export boom in the powerhouse pharmaceuticals and electronics industries, watchers are mixed on how long the boost will last.

NODX expanded by 16.1 per cent year on year in June, according to data released on Friday by trade agency Enterprise Singapore (ESG), which cited “the low base a year ago”. The showing beat private-sector economists’ estimate of 8 per cent growth in a Bloomberg poll, and improved on May’s fall of 4.6 per cent.

ESG attributed part of the export growth to non-monetary gold – a safe-haven asset that saw shipments spike by 238 per cent on the previous year. NODX would have grown by a slower 7.4 per cent if not for non-monetary gold, said Nomura analysts Charnon Boonnuch and Euben Paracuelles, who called the product “the positive surprise to our forecast”.

Growth also came from specialised machinery and the typically volatile pharmaceuticals segment, as well as integrated circuits, after the cyclical decline in electronics in 2019.

Selena Ling, chief economist at OCBC Bank, called pharmaceuticals and electronics “the mainstay for Singapore’s NODX at this juncture”, as they made up a combined 35 per cent of NODX in the first half of the year.

Non-electronic shipments rose by 14.5 per cent in June, after falling by 9 per cent in May, while electronics exports grew by 22.2 per cent, extending May’s 12.4 per cent increase.

But NODX growth may prove a tale of two industries, should the clusters diverge in the coming months.

Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye were cheered by both rising electronics demand and global economic reopenings. “Singapore’s performance is in line with the improving exports performance in the region,” they wrote.

NODX to most of Singapore’s top 10 markets grew in June, led by Japan, South Korea and Taiwan, though shipments to Thailand, Indonesia and Hong Kong stayed negative.

HSBC economist Liu Yun also said: “We believe Covid-19 is accelerating a structural trend in global tech, leading to booming demand for memory chips to facilitate cloud computing.” She cited Singapore’s key role in making 3D NAND flash memory products – a trend tipped to continue “in the months and years ahead”.

On the other hand, Brian Tan, a Barclays Bank economist, said that pharmaceuticals output “may be faltering, leaving less of a cushion” for the gross domestic product. That’s as pharma exports lost ground month on month, non-seasonally adjusted.

Ong Sin Beng, from the JP Morgan economic and policy research team, also flagged a slowdown in pharmaceutical exports to the G-3 economies – Japan, the United States and the eurozone – despite non-G-3 growth. “It appears that pharmaceutical exports to the G-3, particularly the US, had been a key support for Singapore,” he said. “With global demand now ostensibly turning the corner, we expect NODX to similarly stabilise.”

Yet United Overseas Bank economist Barnabas Gan took a different tack. He suggested that pharmaceutical exports will be strong until year-end, on both the low base effect as well as biomedical innovation amid the deadly novel coronavirus pandemic.

Overall, on a seasonally adjusted, monthly basis, NODX inched up by 0.5 per cent to S$14.2 billion in June, after slipping by 4.6 per cent in May.

Headline NODX looks set to surpass the full-year contraction of one per cent to 4 per cent earlier forecast by ESG, with growth of 6 per cent under its belt for the first six months.

“Barring an exacerbation of Covid-19 infections across Singapore’s key trading partners, we are now hopeful for a potential positive growth,” said UOB’s Mr Gan.

Mr Tan told The Business Times that “we would need to see quite notable declines in the second half to end up with a full-year contraction”. He said that exports and factory output gave a “relatively solid performance” in the first half of the year, and added: “The main area of weakness is the services sector, where the outlook remains quite challenging.”

To be sure, OCBC’s Ms Ling warned that the market should not expect double-digit NODX momentum to be sustained into the second half.

Total trade also remains depressed, weighed down by a slump in oil prices. Declines in both imports and exports took total trade to a 6.6 per cent year-on-year drop in June.

Still, the Maybank Kim Eng team concluded that NODX “will likely stay positive in the second half of the year, due to the low base effects from the electronics downturn last year”. Ms Liu, from HSBC, added: “Despite some moderation in sequential momentum in pharmaceutical and electronics exports, we believe the outlook is relatively bright.”