ECONOMY | Tony Chua, Singapore

Morgan Stanley sees continued acceleration of Singapore exports

Yet cautious on the effects of Europe's sovereign debt issues on Singapore's exporters.

Total exports continued the double-digit growth in April, rising 29.8%YoY (vs. +28.8%YoY in Mar-10). On a seasonally adjusted basis, exports rose 1.8%MoM (vs. +2.8%MoM in Mar-10) and now stand 5% below the recent pre-crisis peak (Jul-08). Imports showed a similar trend, accelerating to 32.0%YoY (vs. +30.8%YoY in Mar-10) and are 12% below their recent-pre crisis peak (Jul-08). The trade balance moderated to S$4.0bn (vs. S$4.7bn in Mar-10), according to a Morgan Stanley report.

NODX further picked up pace
More importantly, non-oil domestic exports (which Morgan Stanley regards as a more robust indicator of external demand health) rose 29.4%YoY (vs. +25.4%YoY in Mar-10), above consensus expectations (+25.3%YoY). On a seasonally adjusted basis, NODX rose 2.1%MoM (vs. +2.9%MoM in Mar-10) and have more than fully ploughed back what was lost in the recent downturn, now standing 2% above their recent pre-crisis peak (Feb-08). In terms of segment-wise distribution of NODX, the acceleration was led by non-electronics segment (+35.5%YoY vs. +18.2%YoY in Mar-10) which helped offset the moderation observed in electronics exports (+19.3%YoY vs. +39.4%YoY in Mar-10).

NODX by destinations
Looking at the exports destinations, improvement was observed in exports to both the developed markets like the US (+45.8%YoY vs. +11.8%YoY in Mar-10) as well as emerging markets like China (30.3%YoY vs. +12.3%YoY in Mar-10). However, exports to EU27 moderated to 21.3%YoY (vs. +25.1%YoY in Mar-10).

What next?
Going forward, Morgan Stanley thinks NODX numbers are likely to remain strong in the near term given easy base effect. Further, the latest US ISM New Orders Index which leads by four months and offers a glimpse into the start of 2H is not showing any obvious signs of the leading indicator rolling over, meaning that the export growth moderation that the financial services company expects with the start of 2H10, when the base effect wears out, looks mild for now. However, concerns with regards to the EU sovereign debt issues remain. With its high export orientation and NODX exports to EU27 standing at 14.5% of total NODX exports (as of 2009), Morgan Stanley will be closely watching out for downside risks from trade linkages on that front.

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