Singapore’s economy and related ETF have been constrained by a serious dearth in export demand. It is only a matter of time, however, before world economies resume their previous levels of consumption.
The world’s leading international bank, HSBC (HBC), released a report titled “Primal Knowledge” that revealed Singapore’s economic recovery is broadening and will continue at a rapid pace, with a likely economic expansion of 6.5% in 2010, as stated in The Straits Times. For the third quarter, manufacturing increased 8.3% year-over-year, construction expanded 12.4% and services grew 2.4%.
The HSBC report points to fundamental drivers as a reason to be optimistic about Singapore’s export industry:
- Asian domestic demand is reviving as consumers begin to spend and invest more, which will help boost incomes and encourage further growth in consumption and investment.
- Furthermore, HSBC’s own lead indicator has entered positive levels, indicating a strong export recovery in the second half of 2009.
- Electronics output in Singapore jumped 40% between March and September 2009, thought it is still below its peak. Property values have also risen almost 16% in the third quarter compared to the 2nd quarter, and the government has taken steps to prevent possible asset bubbles.
Singapore’s government believes the economy will expand as little as 3% in 2010 while the Trade and Industry Ministry expects growth of 3% to 5% next year, according to the Associated Press. According to the ministry, GDP grew an annualized 14.2% in the third quarter, but is expected to shrink 2% to 2.5% this year.
- iShares MSCI Singapore Index (NYSEArca: EWS): up 63.4% year-to-date
Max Chen contributed to this article.