Singapore’s manufacturing Purchasing Managers’ Index (PMI) edged up to 51.3 in June from 51 in May, extending its run in expansionary territory. The reading remains above the 50 threshold that separates growth from contraction, pointing to a modest improvement in operating conditions across the sector.
The 0.3-point rise suggests the pace of expansion strengthened slightly month on month. With the index holding above 50, the data indicate output and broader activity continued to expand in June, albeit at a measured rate.
Strengthening Economic Activity and Currency Outlook
We see the June manufacturing PMI figure of 51.3 as a confirmation of strengthening economic activity. This marks the fourth consecutive month of expansion and the fastest pace of growth we have seen in over a year. The data suggests a solid foundation is being built, moving beyond a fragile recovery.
This positive local data reinforces our view for a stronger Singapore Dollar in the coming weeks. With the Monetary Authority of Singapore not scheduled to meet until October, this trend of economic improvement gives them every reason to maintain their policy of gradual currency appreciation. We will be looking at short-term derivative positions that benefit from SGD strength against the U.S. dollar, especially as recent US inflation data has shown signs of cooling.
Market Strategy and Risk Management
For equity markets, this is a clear signal to look at call options on the Straits Times Index. The manufacturing sector, particularly electronics, is a key driver of the index, and this PMI reading is supported by the latest government data showing a 6.2% year-on-year increase in industrial production for May 2026. We believe this momentum makes out-of-the-money calls with an August expiry an attractive, low-cost way to position for upside.
Historically, periods of accelerating PMI readings in Singapore, when not countered by a global crisis, have often preceded a 3-5% rally in the STI over the following two months. We saw a similar pattern emerge in the second half of 2023 which led to a sustained market upswing. We are positioning for a repeat of this performance through the summer.
While the domestic picture is improving, we must hedge against external risks. Potential supply chain disruptions from ongoing geopolitical tensions or a sudden slowdown in China’s economy could quickly change this outlook. We will therefore pair our bullish positions with protective puts on specific export-oriented stocks that are most vulnerable to global trade shifts.
