Electronics strength to fuel Asean exports in post-Covid trade

Vietnam, Singapore and Malaysia will likely notch strong export growth after the coronavirus crisis is over, according to a new report on the trade outlook for Asia.

That's as coronavirus-driven demand could shelter some South-east Asian manufacturers from the brunt of pandemic-related supply-chain disruptions.

Compared with the rest of the regional bloc, Joseph Incalcaterra, HSBC's chief economist for Asean, singled out these three economies as "quite exposed to tech or pharmaceutical supply chains... which offsets a weaker export outlook in other areas".

His report noted that South-east Asia is embedded in the global electronics supply chain in particular. That's even as the Philippines, Malaysia and Vietnam import wafers and circuits from higher-value-add upstream producers and are involved more in testing and assembly.

Mr Incalcaterra cited the region's role in meeting demand for hard disk drives in servers, as well as processor and controller chips for laptops and computers.

While the electronics cycle may slow again in the second half, "the trends driving the outlook are nonetheless structural", he added. For instance, the consumer shift to higher-end 5G-ready smartphones "is likely a question of when, not if, and supports the strong medium-term outlook for the sector".

Besides Singapore's reputation as a high-end memory chip production base in Asia, other bright spots include a pick-up in investments in Malaysian electronics on the back of tech-related tensions between the United States and China, he wrote.

Mr Incalcaterra added that "Vietnam remains an unparalleled success story" for both its labour-intensive electronics assembly and more recent expansion into upstream activities such as chip foundries.

"The latest export prints, coupled with equity market earnings, are starting to reveal clues about the winners and losers that may emerge in a post-Covid-19 world," he said. "For Asia, the clear 'winner' has been the tech sector."