Insights 
VT 
Singapore’s economy saw a year-on-year growth of 4.4% in Q2, slightly above the anticipated 4.3%. There was a 1.4% quarter-on-quarter increase, following a previous 0.5% contraction in Q1.
The Ministry of Trade and Industry has revised its 2025 GDP growth anticipation to a range of 1.5–2.5% from an earlier forecast of 0.0–2.0%. This adjustment is based on a stronger-than-expected performance in the first half of the year.
Non-Oil Export Growth Projections
Non-oil domestic exports are projected to grow within 1.0–3.0% this year, although the future remains uncertain. Officials have indicated risks are leaning towards negative outcomes, with the potential for slower growth in the latter half of 2025 compared to earlier in the year.
The economy’s 4.4% expansion in the second quarter is encouraging, especially after the contraction we saw in the first quarter of this year. This positive data could provide some brief support for the market. The short-term sentiment appears bullish based on this rearview mirror data.
However, we should treat the upgraded full-year GDP forecast of 1.5% to 2.5% with caution. The government itself has warned that growth is likely to slow down in the second half of 2025. This creates a conflict between recent strong performance and a weaker future outlook.
This uncertainty could put pressure on the Singapore dollar, which has been trading firmly around the 1.34 level against the US dollar. With the Monetary Authority of Singapore holding its policy steady in its last two reviews this year, traders may look at options that would benefit from a weaker SGD if the slowdown happens as predicted. This is because a slowing economy often reduces the central bank’s appetite for a stronger currency.
Stock Market Implications
For the stock market, the Straits Times Index has rallied towards the 3,450 level on this recent positive news. Given the warning of downside risks, buying put options on an STI-tracking ETF could be a prudent way to hedge existing long positions. This strategy essentially buys insurance against the forecasted slowdown materializing in the coming months.
The official forecast highlights “uncertainty,” which often translates to market volatility. This environment is suitable for strategies that profit from large price swings, regardless of direction. We could consider using strangles, which involve buying both out-of-the-money call and put options to capitalize on a significant market move.
Looking back, we have seen similar patterns in Singapore’s economic cycles. After the strong rebound following the 2008 financial crisis, for example, growth moderated in the subsequent years. This historical precedent adds weight to the official warnings that the recent strength may not be sustained through the end of 2025.
