Will the MAS ease as exports tumble?

NODX will remain tepid in H1.

Analysts are wondering whether the Monetary Authority of Singapore (MAS) will unleash stimulus measures after the city-state released a set of unexpectedly weak export data in January.

“The key question now is whether there could be some form of monetary stimulus from the central bank. For now, we think that the possibility of a switch of the SGD NEER slope to the neutral appreciation stance (from our estimates of 0.5% pa currently) remains small, as it was only done during economic recessions in the past,” said UOB Economist Francis Tan.

Tan said that another easing is still not likely because the MAS core inflation expectations for 2016 remains low at 0.5% to 1.5%.

“We do not see much reasons for any further lowering of the SGD NEER slope. That said, should global economic conditions continue to stagnate but just shy from a recession, we think that it is more possible for the MAS to ease monetary policy by re-centering the midpoint by 1.0%,” Tan said.

Singapore’s January non-oil domestic exports (NODX) disappointed market with a contraction of 9.9% year-on-year, following the 7.2% year-on-year contraction in December. It was also well below the Bloomberg median estimate of a 7.6%year-on-year contraction.

The poor NODX showing in January was due to the contraction in both electronic and non-electronic exports.

Tan expects NODX to rebound in February due to low base effect from last year, but noted that export performance will remain lacklustre throughout the first six months of the year.

“We are optimistic on NODX for February, largely due to the low base effects. However, this is no cause for cheers and certainly does not signal a turnaround in NODX yet. In fact, 1H 2016 NODX performance is likely to remain weak," Tan said.

Tan expects NODX to contract 1.1% year-on-year in the first quarter.