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Nikkei Markets

Singapore exports edge up but demand from China tumbles

Electronics exports fall for ninth straight month

The high base effects from 2017 would continue to weigh on electronics exports for the rest of this year.    © Reuters

SINGAPORE (Nikkei Markets) -- Singapore's key exports rose in August but views on the prospects for the rest of the year remained bearish given the persistent weakness in electronics and worsening trade relations between the U.S. and China.

Among the city-state's markets, demand from major Asian electronics consumers, including China, South Korea, and Hong Kong, shrank in the month, adding weight to concerns that exports were set to weaken from here on.

Chua Hak Bin, an economist with Maybank Kim Eng in Singapore, noted that electronics shipments have now fallen year-on-year for the ninth consecutive month.

According to data from trade agency Enterprise Singapore, non-oil domestic exports increased 5% in August from a year ago, boosted by stronger shipments of pharmaceuticals, food preparations and measuring instruments, which offset a slight drop in electronics.

The rise was marginally higher than the median forecast of 3.9% growth in a Bloomberg poll but below July's on-year gain of 11.0%.

Compared with a month ago, non-oil domestic exports rose by 0.4% in August to 15.6 billion Singapore dollars ($11.3 billion) after seasonal adjustments, Enterprise Singapore said.

Alvin Liew, senior economist at United Overseas Bank in Singapore, said the high base effects from 2017 would continue to weigh on electronics exports for the rest of this year.

He added that the ongoing U.S.-China trade tensions would cloud the outlook for a trade-dependent Singapore.

Singapore reports non-oil domestic exports as these provide a better gauge of economic activity. This is because prices of refined oil products tend to be volatile, while total exports include the billions of dollars of goods produced elsewhere that are shipped through Singapore's container ports, the world's second busiest after Shanghai's.

Overall, the city-state's trade is about three times gross domestic product.

Enterprise Singapore said domestic exports of electronics shrank 1.5% in August from a year ago, with diodes and transistors, parts of personal computers and integrated circuits contributing the most to the decline.

Non-electronics exports fared better, rising 7.8% on the back of stronger shipments of pharmaceuticals, food preparations and measuring instruments. The growth followed an on-year increase of 18.6% in July.

Although shipments to the U.S., European Union and Southeast Asia increased from a year ago, exports to China slumped 17.8% on year in August while those to South Korea plunged 33.4%. Demand from other northeast Asian economies, including Hong Kong and Japan, also fell.

Looking ahead, Maybank's Chua said trade numbers would continue to be distorted as companies stock up in anticipation of higher U.S. and China tariffs. He said the 14.1% surge in Singapore's non-oil re-exports for August probably reflected some frontloading of shipments in case U.S. president Donald Trump carries out his threat to impose tariffs on another $200-billion worth of imports from China.

Citi, in a separate commentary, said the U.S. announcement on new tariffs is expected early this week, which in turn would prompt China to turn down Treasury Secretary Steven Mnuchin's invitation to a new round of trade talks later this month.

"This could be very negative as high-level discussions between U.S. and China are imperative to diffusion of trade tensions," Citi said.

--Kevin Lim

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