Towards Financial Freedom
Singapore: Resurgence in Pharma Boosted NODX
- The Jun print surprised on the upside with NODX rising by 6.8% yoy as compared to 3.2% in May, and which was underpinned by a resurgence in pharmaceutical shipment. After lackluster 2QGDP advance estimates on the back of weak external demand, expectations were for NODX to underperform. Under such conditions, market expectation was for NODX to rise by just 2.0% vs. our expectations of a 3.4% increase.
- Non-electronics NODX rose by 9.4% yoy in Jun from 2.8% in May, led by the volatile pharmaceuticals, which were up by 24.0% yoy after rising by just 0.2% the month before. The strong performance reinforced our expectations that pharmaceuticals would be the key pillar of manufacturing strength in 2012, albeit at a slower pace than in previous years. This strength in non-electronics NODX helped to offset the weaker-than-expected rise in electronics shipments in Jun. Because of the low base of comparison last year, we had expected a stronger performance by electronics of about 4.5%. Electronics NODX instead came in at just 1.6% yoy, which suggested that the inventory re-stocking which had taken place earlier in the year had slowed on the back of the protracted problems in the Eurozone and we should expect little lift from electronics ahead as a result.
- Despite all the concerns about the Eurozone, shipments to the EU rose by 17% yoy on the back of pharmaceutical exports. Also, shipments to Hong Kong and Indonesia continued to be healthy, increasing by 41% and 20% yoy respectively. Disappointing however were NODX shipments to the US and China, both of which declined by 2.0% and 3.2% yoy respectively. The performances of Singapore's three key export destinations (EU, China and US) have been lackluster to date with NODX shipments to these places up by 0.5-1.6% yoy only in 1H12.
- The recent developments in the Eurozone have impacted Singapore's trade-related sector and externally-oriented industries negatively as reflected in the weak advanced estimates for 2Q GDP. It was thus a pleasant surprise that the Jun NODX showed a healthy jump. However, it might be too early to pop the champagne as NODX growth might not be sustained going forward in light of the current uncertainty in the global economy. We expect lackluster NODX growth of only 4.0% in 2012.
- As for policy, we expect MAS to keep its modest and gradual appreciation stance, given that economic growth is likely to underperform (OSK forecast: 2.6%), though the risk of looser policy has increased. However, any moves to loosen policy would have to be balanced against the need to support growth and to anchor inflation expectations.
Source: OSK
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