In August, Singapore’s non-oil domestic exports (NODX) took a sharp dive, dropping by 11.3% compared to the same month last year. This was a big surprise since a small increase of 0.1% was expected. Monthly exports also fell by 8.9%. Both electronics and non-electronics exports saw declines, with significant cuts in shipments to the U.S., China, and Indonesia. Exports to the U.S. were hit hard, dropping by 28.8% after a 10% tariff was imposed, even with a free trade agreement in place between the two nations. This drop reflects the impact of U.S. trade policies, which indirectly affect Singapore through its trading partners.

Authorities Warn Of Economic Slowdown

Authorities are cautioning that growth may slow down in the latter half of the year, after earlier gains. Still, Enterprise Singapore predicts non-oil export growth of 1% to 3% by 2025. The unexpected 11.3% decline in August’s non-oil exports is a serious warning signal, indicating a stronger economic slowdown than expected for the second half of the year. This data challenges the official full-year growth forecasts, suggesting third-quarter GDP results might disappoint. It confirms a bearish outlook for assets tied to Singapore in the short term. This economic weakness is likely to put additional downward pressure on the Singapore dollar. With the USD/SGD pair recently rising above 1.38, there is a strong case for taking long positions on this pair, possibly through call options that expire in October or November. The Monetary Authority of Singapore is now very unlikely to consider tightening policy at its upcoming October meeting, removing a critical support for the currency. On the equity side, the Straits Times Index (STI) appears at risk, as the export weakness affects both the electronics and non-electronics sectors. Buying put options on an STI-tracking ETF or on specific industrial stocks heavily exposed to the U.S. and China could be a smart move to protect against or profit from any downturn. The index has struggled to stay above the 3,200 level over the past month.

Broader Regional Context Consideration

It’s essential to look at the broader regional context. This data aligns with recent Chinese purchasing managers’ index (PMI) figures that have remained just below the 50-point mark, indicating contraction. The steep 28.8% drop in exports to the U.S. is particularly concerning and points to weaker global demand than markets had anticipated. Such conditions often lead to higher market volatility, making options strategies that capitalize on price swings more attractive. This situation resembles the trade slowdown we faced in 2023, which resulted in several months of a weaker Singapore dollar and volatile stock market conditions. However, we should also note that the official forecast for non-oil exports in 2025 still anticipates growth of 1% to 3%. This indicates that authorities expect a strong recovery in the last quarter, suggesting any bearish strategies we implement should be tactical and short-term, as an unexpected rebound could quickly alter these trends. Create your live VT Markets account and start trading now.

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