SG leads ASEAN manufacturing sector: report

Nomura expects a 7.1% GDP for Singapore this year.

Singapore is likely to be immune from slower global growth in the manufacturing sector, according to a report from Nomura Global Markets Research.

The Lion City is the top performer in the ASEAN region, it added, whilst Thailand will likely still lag far behind after re-opening from lockdown measures.

This is despite “lower-than-expected” industrial production (IP) figures recorded in August, as key segments in Singapore give ample cushion.

“On a sequential basis, Singapore’s industrial production growth fell to a seasonally adjusted 2.8% m-o-m from 5.6% in August; this translates into a lower-than-expected -3.4% y-o-y from 11.0% (Consensus: -0.9%; Nomura: -0.8%),” Nomura said.

Singapore’s industrial production was well above pre-covid levels by 25.9% in September, it added.

“In Singapore, apart from output from high-tech chips and semiconductor equipment (56.7% of IP) which are still supported by the tech uptrend, pharmaceuticals output (6.8% of IP) is likely to continue to benefit from global vaccine demand despite a further drag in September (-46.2% y-o-y partly due to base effects but on a sequential basis growth increased to 9.8% m-o-m sa from -15.8%). Indeed, overall biomedical manufacturing (13.6% of IP) is providing a lift to Singapore’s total output,” the report read.

Singapore’s manufacturing sector, which is driven by external demand could be affected by slower global growth led by China, with Nomura equity analysts expecting the tech up-cycle to continue to next year.

“Despite slowing global growth led by China, our equity analysts expect the tech up-cycle to continue next year; they recently raised their semiconductor shipment growth forecast to 20.6% y-o-y from 19.4% in 2021 and maintain their 2022 forecast of 10.5%. As argued above, this will remain supportive of Singapore’s IP, while the supply chain disruptions may be easing, particularly with the continued reopening in Malaysia, where the latest lockdown measures led to some factory shutdowns. By the same token, we expect Singapore’s pharmaceuticals output to remain strong, buoyed by global vaccine demand; this boost may persist beyond this year, even if global growth slows owing to increasing implementation of booster shots globally and additional capacity from new plants in Singapore come on stream,” the financial services firm said.

Nomura maintained its GDP growth forecasts of 7.1% for 2021 and 4.6% for 2022.

It added that it is likely that the Monetary Authority of Singapore would tighten its policy stance again in April 2022.