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Nikkei Markets

Singapore exports weather headwinds, beat growth expectations

Demand from China plunges again in October

According to data from trade agency Enterprise Singapore on Friday, the city-state’s non-oil domestic exports rose 8.3% in October from a year ago.   © Reuters

SINGAPORE (Nikkei Markets) -- Singapore's nonoil exports rose for a seventh straight month in October, defying expectations of a slowdown as strong shipments of pharmaceuticals and food preparations offset a continued decline in electronics.

Figures released Friday also showed a continued shift in trading patterns. While demand from China continued to weaken, that from the European Union and the U.S. surged.

Still, most economists remained wary about the outlook, citing the slowing Chinese economy and uncertainties posed by the ongoing trade war between Washington and Beijing.

According to data from trade agency Enterprise Singapore on Friday, the city-state's non-oil domestic exports rose 8.3% in October from a year ago, faster than September's 8.1% pace and handily beating the 1.0% consensus estimate of economists in a Refinitiv poll.

The strong export numbers were also at odds with purchasing managers' index figures released earlier this month, which showed a softening in Singapore's manufacturing and electronics sectors.

Compared with the previous month, non-oil domestic exports increased 4.2% to S$15.6 billion ($11.3 billion) after seasonal adjustments, reversing a 4.4% on-month decline in September.

Enterprise Singapore said shipments of electronics declined by 3.5% year on year in October following a 1.3% decrease the previous month. Non-electronics, however, grew by 12.8% as shipments of pharmaceuticals gained 89.7% and exports of food preparations doubled.

Maybank Kim Eng said the strong growth in pharmaceuticals this year was due to the opening of new manufacturing sites in Singapore such as American drugmaker AbbVie's biologics facility as well as the ramp up of production by the U.S.'s Amgen and Switzerland's Novartis.

In terms of markets, exports to China fell 25.8% on year in October while those to European Union and the U.S. gained 37.0% and 32.8%, respectively. Shipments to China, Singapore's largest market, have fallen for several months now, with many attributing the drop to the slowing Chinese economy.

Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye highlighted the 26.4% growth in Singapore's non-oil re-exports, the strongest in nine years, which indicated a frontloading of shipments to the U.S. ahead of January 1, when U.S. tariffs on Chinese goods are set to rise further.

Economists usually focus on Singapore's non-oil domestic exports as these provide a better gauge of economic activity within the city-state. But Singapore is also a major transhipment point for billions of dollars' worth of goods that have been produced elsewhere.

The U.S.-China trade war has disrupted supply chains across Asia, affecting in particular economies such as South Korea, Taiwan and Singapore, which are key suppliers of electronic components.

In a report earlier this month, Oversea-Chinese Banking Corp said global trade tensions have begun to hit Asian economies outside of China as seen from softer manufacturing PMI readings across the region. The notable exception is Vietnam, which has benefited from a wave of foreign direct investments as companies shift production from China.

"We think Singapore's trade growth has peaked and will likely slow sharply in early 2019," Maybank Kim Eng said.

--Kevin Lim

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