SINGAPORE (Nikkei Markets) -- A government survey shows Singapore manufacturers have become more optimistic about prospects but economists say the sector's recovery will be delayed as the coronavirus outbreak in China rattles global markets.
According to a quarterly business expectations survey by the Singapore Economic Development Board carried out in December and January, a net weighted 12% of manufacturers expect business conditions to improve in the next six months, a sharp turnaround from October when a net 5% said they were pessimistic about prospects.
In other words, 19% of companies anticipate better times while 7% forecast a tougher period. The remaining 74% expect conditions to stay the same.
EDB's survey assigns weights to respondents based on the size of their operations in Singapore.
Sentiment was strongest in the electronics sector. A net 23% of companies expressed confidence about the future, reflecting the uptick in orders for semiconductors and other equipment in recent months as companies begin to roll out advanced 5G telecommunications networks in many countries.
Singapore's economy is on the cusp of a recovery after the extended U.S.-China trade war battered the city-state's exports as demand in key markets fell.
Now, economists say the turnaround in manufacturing will be delayed by the spread of the coronavirus, whose extent became clear over the past week when China started locking down entire cities in an attempt to contain the outbreak. Many responses obtained by EDB probably did not factor in the disruptions due to the timing of the survey, they added.
Song Seng Wun, an economist with CIMB Private Banking, said the impact on supply chains will depend on the time taken to stem the spread of the virus. "It could just be a bad February but a sharp rebound in March," he said. The worst case would be a bad first quarter followed by a rebound in the second.
In a report earlier this week, Oversea-Chinese Banking Corp said the outbreak could derail the global economic recovery by killing the nascent pickup in global and regional manufacturing.
In Singapore, a separate Department of Statistics survey on the services sector conducted between December and mid-January showed a net weighted 2% of firms expect conditions to weaken, reversing from the net 1% of firms that were positive in the previous survey.
That outlook is set to worsen with several Singapore companies reporting massive disruptions to their operations in China. Manufacturing accounts for about 20% of Singapore's economy, while services make up another 70%.
CapitaLand, Southeast Asia's biggest developer, said this week it has temporarily closed six malls in China and shortened operating hours at 45 other properties to comply with government measures aimed at halting the spread of the coronavirus.
Singapore Airlines and regional unit SilkAir have said they will reduce capacity on selected routes to mainland China, while low-cost carrier arm Scoot announced earlier that it will suspend flights to 11 Chinese cities and reduce the frequency of service to other destinations due to weak demand and the constraints of operating in China.
DBS Group Research said that the new coronavirus outbreak in China has injected a degree of uncertainty not seen since the height of trade wars. While it is too early to consider forecast downgrades, "travel, tourism, and commerce are getting hit by the day," the economic research arm of Singapore's largest bank said in its report.
The coronavirus, which first emerged in the Chinese city of Wuhan in December, has so far killed over 200 people in China and sickened around 10,000 people across the globe.
Maybank Kim Eng, the corporate finance advisory and stock brokerage arm of Malaysia's largest bank, said that among the 10-member Association of Southeast Asian Nations, Singapore and Thailand are likely to be the worst hit due to their trade and economic links with China while Indonesia and the Philippines would be least affected.
-- Kevin Lim