Singapore’s industrial production fell by 13.3% in December compared to the previous month, which was better than the anticipated 15.2% drop. This indicates ongoing challenges in the manufacturing sector, influenced by global supply chain issues and economic uncertainties. The manufacturing sector is crucial for the economy, and this result hints at some resilience, although the overall trends still look concerning.

Global Economic Factors

The global economy is influenced by geopolitical tensions, trade disputes, and shifts in monetary policy. As countries navigate these challenges, potential patterns may emerge that could impact future economic forecasts. At the close of last year, Singapore’s industrial production dropped 13.3%, a significant decline but still an improvement over the expected 15.2% decrease. This slight outperformance suggests the manufacturing sector might be stabilizing, creating a sense of cautious hope as we began the new year. Recent flash manufacturing PMI data for January supports this outlook, showing a score of 49.8, up from 47.5 in December 2025. While it still indicates slight contraction, this improvement suggests that the worst of the decline may have passed. Traders should keep an eye out for signs of stabilization in economic activity.

Electronics Cluster Impact

The electronics cluster, vital to the local industry, is rebounding as global semiconductor sales saw their first monthly rise in six months. This has helped strengthen the Singapore dollar, with the USD/SGD exchange rate decreasing from its late 2025 peak of around 1.3800. The reduced anxiety is also reflected in lower implied volatility for SGD options. In light of this situation, it may be wise to focus on strategies that take advantage of stabilization instead of a rapid rebound. Bull call spreads on the Straits Times Index (STI) offer a defined-risk approach to positioning for modest gains in the coming weeks. Alternatively, selling out-of-the-money puts on solid industrial stocks could provide a way to collect premium, with the belief that a major collapse is now less likely. Create your live VT Markets account and start trading now.

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