Don’t celebrate the surge in exports just yet, say analysts

It’s based on a few narrow segments, they said.

While casual onlookers may view the 11.6% May surge in non-oil domestic exports (NODX) as a reason to jump for joy, analysts say this outperformance may ring hollow as it was only really based on a few narrow segments, particularly gold.

According to a report by UOB, while the surge was the best since the 18.5% increase in March of last year, the outlook for the major segments of NODX, electronics, chemicals & petrochemicals, still do not look good.

“Of note, Singapore’s trade agency downgraded their 2016 NODX forecast to a contraction range of -5% to -3% on 25 May,” UOB said.

“This time round, the jump in non-electronics exports was clearly due to prefabricated buildings (increase not given by IE) and importantly, the +436.7%y/y increase in non-monetary gold exports,” UOB added.

Meanwhile, UOB said gold was a clear beneficiary of the uncertain environment in the first half of 2016: From the capitulation of the Chinese markets and plunging crude oil prices in early part of the year to the subsequent incredulous recovery of commodity prices.

“The high gold price could have led to gold dishoarding, incentivizing sellers to come out to take advantage of the surge in gold prices while gold demand was also likely to be robust in May ahead of key geo-political risk event in summer,” UOB said.