Hopes fade for a NODX rebound in end-2012

NODX declined for the second straight month in September.

Here's more from DMG:

NODX came in below expectations, declining for the second straight month in Sep. Market and we were expecting a rebound in Sep, especially since NODX were weak in Sep last year. Sep's contraction of 3.4% yoy was however more moderate that the 10.7% drop in Aug.

On a mom sa basis, NODX rose by just 1.6% in Sep, more favorable than Aug’s 9.1% decline. This yoy weakness in NODX was fairly broad-based again with electronics still on a decline, though non-electronics shipments strengthened in Sep compared to the previous month.

There was a steeper decline in electronics NODX of 16.4% yoy in Sep as compared to -11% in Aug, dragged down by weak demand for ICs (-22.4%), parts of PCs (-27.9%) and diodes & transistors (-21.8%). Non-electronics NODX rebounded by 4.2% yoy in Sep from -10.5% in Aug.

Pharmaceutical shipments contracted by 3.0% yoy, but were offset by stronger gains in petrochemicals (5.5%), structures of ships & boats (6,455%), non-monetary gold (113.5%) and printed matter (39.4%).

The weakness in NODX extended geographically as well with shipments to major export markets down in Sep. Of the top five export destination, only China saw gains of 1.8% yoy in Sep, while shipments to the EU, Hong Kong, US and Malaysia declined by 15.7%, 17.0%, 7.2% and 19.0% respectively.

Hopes for a rebound on the back of year-end holiday season demand appear to have faded. Weaknesses in leading indicators such as the SEMI book-to-bill ratio (below parity since Jun) and US new orders for electronics for electronics (contractions from May to Aug) and OECD leading indicators and PMIs globally so far continue to suggest further slowdown in export demand ahead.

Moreover, the continued strength of the Singapore dollar (given the continuing “tighter” exchange rate policy) is also likely to increase competitive pressure on NODX, thus possibly inhibiting any quick recovery. With NODX up by just 2.1% yoy in the first nine months of the year, it is unlikely to come in below IE Singapore’s 3-5% forecast.

Though risks to growth are still on the downside (recall advanced 3Q12 GDP was up by just 1.3% yoy ), we are still keeping to our full-year growth forecast of 2.0% for 2012 (cf. the official forecast: 1.5-2.5%) for now.