To The Moon

Tiger Singapore Research $Straits Times Index(STI.SI)$

Growth flat sequentially. According to flash estimates from Ministry of Trade and Industry (MTI), Singapore GDP came in flat sequentially on a seasonally adjusted basis and +4.8% yoy in 2Q22. This was slower than the median estimates of +5.4% yoy, due to weakness across manufacturing, construction, and services. The sequential growth was just short of registering a decline amid the looming impact of rising inflation and overall slower global uncertainty especially with global trading partners also facing similar uncertainties of slower global growth.

Singapore Gross Domestic Product

Slower growth ahead. MTI GDP growth forecast for 2022 is expected to come in at the lower end of the forecast of 3-5%. While Monetary Association of Singapore (MAS) expects slowing external growth momentum to weigh on Singapore’s trade related sector in the second half. Looking to the next year, growth is further expected to slowdown in Singapore as pressures of inflationary and cost of borrowing is expected to dampen growth. The World Bank has also reduced global growth to slow from 5.7% in 2021 to 2.9% in 2022. Various factors of growth slow down include the long-drawn Russian-Ukraine war, supply chain disruptions and as global central banks enter a tightening cycle.

Singapore GDP YoY (%)

Unexpected tightening. MAS tightened its monetary policy on 14 July in an off-cycle decision ahead of its October meeting to combat the rising inflation issue in Singapore. This come as Singapore registered +5.6% on its consumer price index in May. The MAS uses exchange rate policies by re-centering the mid-point of the nominal effective exchange rate (S$NEER), this comes after last tightening in April. This is expected to help to alleviate the import push inflation which Singapore is susceptible as a small and open economy. SGD at 1.4 to the USD, depreciated by around 4% year to date, but is one of the better performing regional currencies.

SGD to USD exchange rate

SG residential resilient. Amid the rising inflation and inflow of hot money, given the more resilient SGD and macroeconomic outlook, Singapore residential property has continued to stay resilient. Property have also been historically a good hedge against inflation after weighing the local mortgage rates that have started to creep higher. Construction costs and land prices as well as a tight inventory has led developers to continue to price residential property firmly. URA property price index rose 3.2% in 2Q21 as buyers continue to flock towards new launches amid the tight uncompleted and unsold private housing of just over 14k units in 1Q22.

URA Property Price Index Residential All