RMB weakness won’t cripple Singapore’s exports, analysts say

Initial fears are overblown.

Exporters watched with horror last week when the People’s Bank of China unexpectedly devalued the RMB. Fears were rife that the RMB would depreciate steeply and vastly weaken Singapore’s already lacklustre exports.

But the initial worries are overblown, according to UOB.

“The recent RMB devaluation seems to point towards even weaker Singapore exports in the near future. Indeed, that would be the case if the RMB devaluation was as aggressive as it had set out to be. However, it was not. The PBoC news conference last week had reiterated that the bulk of the adjustment 'appears to be over' and that had calmed market sentiments as the authorities had no intention to set the RMB on a one-way depreciation course,” UOB said in a report.

Although the decline in July NODX again fanned fears on China’s growth slowdown, UOB believes that the weakening RMB will not have a significant effect on Singapore exports.

“As such, we think that the impact of PBoC’s action last week on Singapore’s export sector would probably be minimal. In fact, the SGD remains on a weakening trend against the RMB in the medium term. As an example, although the SGD gained 1.2% against the RMB since compared to the start of this year,” UOB noted.