In August, Singapore’s non-oil domestic exports (NODX) fell sharply, decreasing by 11.3% year-on-year against an expected rise of 0.1%. On a monthly basis, exports dropped by 8.9%. Both electronics and non-electronics exports experienced downturns, with notable reductions in shipments to the U.S., China, and Indonesia.
Exports to the U.S. were particularly affected, declining by 28.8%, following a 10% tariff despite a free trade agreement between the two countries. This decline is attributed to pressures from U.S. trade policies, which indirectly impact Singapore through its trade partners.
Authorities Warn Of Economic Slowdown
Authorities warn of a slowdown in growth for the latter half of the year, following early gains. However, Enterprise Singapore has forecasted non-oil export growth between 1% and 3% by 2025.
The unexpected 11.3% plunge in August’s non-oil exports is a serious red flag, pointing to a sharper economic slowdown than we had anticipated for the second half of this year. This data significantly challenges the official full-year growth projections and suggests that third-quarter GDP figures may disappoint. For us, this confirms a bearish bias for Singapore-linked assets in the immediate term.
This economic weakness should place further downward pressure on the Singapore dollar. With the USD/SGD pair already breaking above 1.38 in recent trading sessions, we see a strong case for entering long positions on the pair, potentially through call options expiring in October or November. The Monetary Authority of Singapore is now highly unlikely to consider any policy tightening at its upcoming October meeting, removing a key support for the currency.
On the equity side, the Straits Times Index (STI) appears vulnerable, as the export weakness was seen across both the electronics and non-electronics sectors. Buying put options on an STI-tracking ETF or on specific industrial stocks with heavy U.S. and China exposure seems like a prudent strategy to hedge against, or profit from, a potential downturn. The index has already shown weakness, struggling to maintain its footing above the 3,200 level over the past month.
Broader Regional Context Consideration
We need to consider the broader regional context, as this data aligns with recent Chinese purchasing managers’ index (PMI) numbers that have hovered just below the 50-point mark signifying contraction. The sharp 28.8% fall in exports to the U.S. is especially alarming and suggests global demand is faltering more than markets have priced in. This kind of environment often leads to higher market volatility, which could make options strategies that benefit from price swings more appealing.
This situation feels similar to the trade slowdown we experienced back in 2023, which resulted in several months of a weaker Singapore dollar and choppy conditions for the stock market. However, we must also acknowledge the official forecast for non-oil exports for 2025 still projects growth of 1% to 3%. This suggests authorities expect a strong rebound in the final quarter, meaning any bearish positions we take should be tactical and short-term, as a surprise recovery could quickly reverse these trends.
