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Nikkei Markets

Unexpected fall in Singapore's exports casts shadow on growth

December figures show broad-based decline across markets, categories

Workers look as a container ship is unloaded at a berth in a PSA International port terminal in Singapore September 25, 2013.    © Reuters

SINGAPORE (Nikkei Markets) -- The surprise fall in Singapore's key domestic exports in December has emphasized that Asia's trade engine is spluttering after two years of heady growth and raised the likelihood that the city-state may be in for an even slower pace of growth than expected.

Singapore's shipments to the U.S. held up and those to China recovered, after falling for several months in a row. However, exports to other major markets such as the European Union, Japan and South Korea registered double-digit decreases in December. Closer home, shipments to Malaysia declined 15.5% from a year ago.

The data released by trade agency Enterprise Singapore also showed falling overseas sales of specialized machinery, chemicals and pharmaceuticals, indicating the slowdown extended beyond the U.S.-China trade war and the downturn in the global electronics industry.

"It's hard to find a single smoking gun for...today's decline," said Robert Carnell, ING's chief economist and head of research for the Asia-Pacific. "Practically everything was weak," he added.

December's data, which showed an 8.5% fall in non-oil domestic exports from a year ago and a worsening from November's contraction of 2.8%, was the weakest since October 2016. The consensus forecast was for a slight increase of around 1.5% on-year, according to a Refinitiv poll.

Selena Ling, head of treasury research and strategy at Oversea-Chinese Banking Corp, said the poor showing, across both the electronics and non-electronics segments, was in line with recent trade data disappointments from China, South Korea, Taiwan, the Philippines and Indonesia.

According to Ling, December's data implied Singapore's non-oil domestic exports grew by just 4.4% for the whole of 2018, below the official forecast of 5.5% to 6.0% that was given in November.

Compared with a month ago, non-oil domestic exports fell by 5.7% in December to 14 billion Singapore dollars ($10.3 billion) after seasonal adjustments, Enterprise Singapore said.

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.

ING's Carnell said that Singapore may have to revise down its 2018 economic growth estimate from the 3.3% reported earlier this month.

The central bank may also stand pat when it issues its next half-yearly monetary policy statement in April, given the broad weakness in exports, he added.

The Monetary Authority of Singapore manages policy by letting the Singapore dollar rise or fall against an undisclosed basket of currencies. Currently, its stance is to allow a modest and gradual appreciation of the local dollar.

According to Enterprise Singapore, shipments of electronics declined by 11.2% in December from a year ago following November's expansion of 4.3%, while shipments of specialized machinery, pharmaceuticals and primary chemicals fell by 32.5%, 26.8% and 28%, respectively.

Economists said the sharp drop in electronic shipments suggests November's recovery was just an aberration and that the downward trend was very much intact.

Looking ahead, Nomura said Singapore's non-oil exports would likely fall in the first three months of this year in line with the decline in the global technology cycle.

Leading indicators that point to a contraction in regional exports include China's imports turning negative for the first time in two years, a fall in global semiconductor sales, and weaker readings for the manufacturing purchasing managers' index in many developed countries, the Japanese investment bank said.

--Kevin Lim

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