Singapore’s industrial production rose 4.7% m/m (seasonally adjusted) and 10.1% y/y in March, after -1.2% m/m and 3.3% y/y in February. Manufacturing growth in 1Q26 was 7.9% y/y, above the 5.0% y/y in the advance estimates.
If construction and services were unchanged from the advance estimates, 1Q26 GDP growth may be revised to about 5.2% y/y from 4.6%. The March rise was led by electronics and precision engineering output.
Electronics increased 5.7% m/m (seasonally adjusted) in March, after 5.1% in February. Precision engineering rose 21.8% m/m, after -13.3% in February.
Chemicals fell 18.5% m/m in March, after -1.8% in February. Within chemicals, petrol output declined 13.4% in March versus -12.5% in February, while petrochemicals dropped 23.9% versus -8.1%.
The Economic Development Board cited disruptions in feedstock supply, and reports noted refinery and petrochemical run cuts in Asia, with some force majeure declarations. Electronics and semiconductors linked to AI-related demand were cited as supporting overall output.
Given the strong March industrial production figures, we see a likely upward revision to Singapore’s first-quarter GDP growth for 2026. This strength is not surprising, as advance GDP estimates have historically been revised upwards in a majority of recent quarters. This provides a solid backdrop for bullish sentiment on the broader Singaporean market.
The electronics sector is the clear engine of this growth, propelled by sustained global demand for AI-related semiconductors. The latest data from the Semiconductor Industry Association confirms this, showing global sales jumped 22% year-over-year in March, with forecasts pointing to continued strength. This suggests that buying call options on specific semiconductor and precision engineering stocks could offer upside exposure in the coming weeks.
Conversely, a major slump is evident in the chemicals segment due to feedstock supply disruptions, with a sharp plunge seen in petroleum and petrochemical output. Recent industry reports confirm this trend, with Platts noting that Asian naphtha cracker operating rates fell to a two-year low last week as more producers cut runs. This growing headwind makes buying put options on exposed chemical companies a compelling strategy to hedge against or profit from further weakness.
The most effective strategy appears to be a divergence trade, focusing on the widening gap between the booming tech sector and the struggling chemical industry. We saw a similar dynamic back in 2022 when energy supply shocks caused significant underperformance in downstream producers for several quarters. A pair trade that is long tech-related equities and short exposed chemical stocks could capture this ongoing performance gap.
