The Singapore Manufacturing PMI rose slightly to 50.2 in November from 50.1. This indicates a slow improvement in manufacturing, with modest activity growth. A PMI above 50 shows the sector is still expanding, even with wider economic challenges. This data reflects a broader economic landscape where different economies are experiencing various growth rates. Factors like global trade changes, supply chain issues, and inflation pressures are at play. Overall, these developments are being closely watched for their possible effects on monetary policy and market outlook.

Strength in Manufacturing Sector

The recent PMI reading highlights some resilience in Singapore’s manufacturing sector despite ongoing economic uncertainties. With a November PMI of 50.2, our view remains that the manufacturing sector is only slightly expanding. This small growth occurs even as the electronics sub-index, a significant part of the sector, contracted for the third straight quarter, according to recent data from the Economic Development Board. Thus, we see this as a sign of stagnation, just above the neutral level, rather than renewed strength. For currency traders, this weak data lowers the chances of the Monetary Authority of Singapore (MAS) taking a more aggressive approach. Core inflation held steady at 3.1% in October 2023, but the sluggish growth suggests MAS will focus on stability. This might lead traders to sell out-of-the-money call options on the Singapore dollar against the US dollar, as a significant rise in value seems less likely soon. Looking at the Straits Times Index (STI), this information advises a cautious approach towards manufacturers and export-driven companies. Recall the lengthy period from 2022 to 2023 when the PMI stayed around 50, limiting significant gains in industrial stocks. Traders might consider purchasing put spreads on the index to protect against a possible decline, as corporate earnings could disappoint.

Global Economic Sensitivity

In the coming weeks, China’s industrial production figures and the U.S. non-farm payroll report will be crucial. Singapore’s open economy is very sensitive to global demand, and this PMI reading offers little protection against slowdowns in these key markets. We are preparing for ongoing volatility and using options to manage risk since local data can be easily overshadowed by larger global trends. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now