Singapore’s September exports hint at green shoots, but geopolitical tensions raise risks

SIGNS of a nascent recovery have emerged in Singapore’s key exports, economists said, with September data having showed a slowdown in the pace of contraction.

Their cautious optimism was fuelled in part by a rebound in non-oil domestic exports (NODX) to three of the city-state’s top 10 markets – China, Hong Kong and the US.

In particular, exports to China jumped 26.2 per cent year on year (yoy), in the best showing since December 2021, and reversing the 19.3 per cent contraction in August. Shipments to Hong Kong surged 55 per cent yoy in September, also a turnaround from the 5.9 per cent fall previously.

This is despite overall NODX marking its 12th straight month of decline: September still showed exports shrinking by 13.2 per cent yoy, data from Enterprise Singapore (EnterpriseSG) showed on Tuesday (Oct 17).

Still, it is an improvement from the previous month’s 22.5 per cent slump, which surprised the private-sector economists polled by Bloomberg; they had anticipated a 15 per cent contraction.

While electronics and non-electronics exports both fell in September, the pace appears to have slowed. Electronic shipments shrank by 11.6 per cent yoy, easing from August’s 21.1 per cent contraction. The decline for non-electronic exports was 13.6 per cent, compared with 22.9 per cent in the previous month.

Several economists now believe NODX could gradually recover by the end of this year.

Maybank economists Chua Hak Bin and Brian Lee said: “We are seeing green shoots of recovery in the electronics cycle, as reinforced by the latest electronics NODX data, as well as improvements to Korea and Taiwan chip exports in September.”

They added that exports to China were “surprisingly robust”, with further improvement possible over the coming months due to the low base and a gradual rundown of industrial inventories. “All in, we think NODX could recover to positive growth in the fourth quarter.”

Concurring, RHB acting group chief economist Barnabas Gan said key economic indicators across the US and Asean have continued to improve in the year to date, as key central banks are at or are approaching their peak rate objectives.

Meanwhile, subtle signs hint at a recovery in China, as seen in its retail trade numbers, consumer confidence levels and exports – even though these numbers are “likely precarious” for now, he said.

“More importantly, despite the escalation of geopolitical tensions, we see little hints of market pessimism; global equity markets saw a quick knee-jerk reaction before short-covering behaviour ensued late last week,” said Gan. “Global investors appear to be in risk-taking mode, given the ongoing recovery in global economic momentum.”

DBS economist Chua Han Teng noted that base effects should become more supportive over the coming months.

“Forward-looking indicators point to a gradual and fragile exports recovery in a still-uncertain global economic environment,” he said, noting that new export orders within Singapore’s Purchasing Managers’ Index improved for the fourth straight month in September, returning to the 50.0 mark that separates expansion and contraction.

He said Singapore’s electronics exports are expected to benefit from the modest turnaround in global semiconductor sales, and medium-term optimism over AI-related chips. But he added that recovery would be fragile, as geopolitical tensions could still disrupt supply chains.

OCBC chief economist Selena Ling has more reservations stemming from the outbreak of the Israel-Hamas war.

“The current economic-geopolitical landscape remains fragile, given the latest Israel-Hamas conflict, which has fuelled concerns of spillovers to the rest of the Middle East region and the energy market. This could in turn complicate the disinflation trajectory that was supposed to allow central banks to remain on pause mode, or pivot to easing down the road,” she said.

She added that the US’ moves to tighten restrictions on AI chip and chipmaking equipment exports to China in the latest round of crackdowns could also potentially derail bilateral rapprochement efforts, despite market hopes of a meeting between US President Joe Biden and Chinese leader Xi Jinping in November.

“It remains prudent to see what happens from here, and whether the NODX green shoots will sustain into the new year,” she said.