Yahoo Finance Analysts note ‘muted’ 1Q2024 NODX as February’s numbers disappoint
Analysts from OCBC and UOB are keeping their FY2024 NODX estimates unchanged.
Singapore’s non-oil domestic exports (NODX) fell by 0.1% y-o-y and 4.8% m-o-m to $14.2 billion in February. During the month, non-electronic NODX fell by 1.5% y-o-y with food preparations, specialty chemicals and electrical circuit apparatus contributing the most to the declines at 23.5%, 19.7% and 36.9% respectively.
Meanwhile, electronic NODX rose by 5.2% thanks to integrated circuits (ICs), personal computers (PCs) and parts of ICs contributed the most with y-o-y growths of 15.9%, 26.2% and 54.8% respectively.
To Selena Ling, chief economist and head of global markets research and strategy at Oversea-Chinese Banking Corporation (OCBC), the “unexpected” contraction of February’s NODX came as a disappointment. However, as the Lunar New Year holidays fell in January last year but happened in February this year, Ling deems it to be more appropriate to look at the average of the performances in January and February.
For the two months, Singapore’s NODX grew at an average of 8.4% y-o-y, an improvement from the 20.4% y-o-y contraction registered for the same period in 2023. Singapore’s NODX expanded by 16.7% y-o-y in January.
This seems to be the trend with Taiwan’s February exports also moderating sharply from 18.1% y-o-y in January to just 1.3%, with parts of electronics products also sinking by 10.4% y-o-y. South Korea’s February semiconductor exports rose 6.7% y-o-y, lower than its 56.2% y-o-y expansion in January, notes Ling.
That said, electronics exports, which saw its second month of expansion and a marked y-o-y improvement in February, came as a “silver lining”.
Overall, the economist sees the 1Q2024 to be a “muted start” for NODX. With her March forecast of -8.0% y-o-y due to the high base last year, 1Q2024 NODX is expected to come in at 2.9% y-o-y.
However, Ling’s NODX forecast for the full year remains at 4% to 6% y-o-y, same as the official forecast.
“While the external demand picture is stabilizing, the geopolitical implications on supply chain recalibration continues to shift,” says Ling, referring to several updates including US Commerce Secretary Raimondo’s remarks about the US helping the Philippines double its semiconductor facilities to lessen the concentration of the global chip supply chain from a few countries.
The US Commerce Department is also considering adding several Chinese tech companies to its entity list which restricts access to US technology. At the same time, China’s Ministry of Industry and Information Technology was reported to have asked electric vehicle (EV) car-makers including BYD and Geely to increase the use of local auto chipmakers.
Meanwhile, Republican nominee Donald Trump has threatened 100% tariffs on Chinese cars manufactured in Mexico.
“The implications for the rest of Asean manufacturing outlook, particularly for the chip sector, remains slightly cloudy at this juncture, albeit artificial intelligence (AI)-enabled phones and PCs may see increased demand going forward,” says Ling.
“Singapore’s manufacturing and electronics purchasing managers’ index (PMIs) had also eased marginally to 50.6 and 50.4 respectively for February, compared to 50.7 and 50.6 in January 2024, but remained in expansion territory,” she adds.
UOB’s senior economist Alvin Liew and associate economist Jester Koh are keeping their full-year NODX estimate unchanged at 6.0% despite the weaker-than-expected numbers.
To them, the data from January and February points to an “ongoing recovery” in NODX with an average 8.4% y-o-y expansion. “[This is] arguably a more reliable assessment as it partly accounts for the Lunar New Year holiday effects,” they write.
While February’s NODX was dragged by non-electronics products, the economists see recovery prospects in electronics.
“Given the inherent volatility in NODX, we smooth the data by computing the y-o-y changes of the average NODX for the last six months (“six-month moving average (6MMA) y-o-y”) to capture key trends,” say the UOB economists.
“On a 6MMA y-o-y basis, electronics NODX exhibited incrementally narrower contractions (February: -6.5%, January: -10.9%, December: -15.3%) from the weakest reading recorded in May 2023 (-24.0%) which affirms the ongoing upturn in the electronics / semiconductor cycle. Likewise, on a 6MMA y-o-y basis, NODX to our top trading partners recorded successive improvements, namely to the US (February: 11.7%, January: 0.7%), China (February: 28.6%, January: 23.6%) and European Union (EU) 27 (February: -13.5%, January: -17.4%),” they add.
In 2024, the economists see that Singapore’s NODX will see a recovery mainly due to the base effects of the sharp double-digit y-o-y decline in electronics NODX from November 2022 to September 2023. That said, they note that the sequential recovery could be challenging in 1H2024 given tight financial conditions in the US and EU.
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