FX Notes - SGD: Limited Impact From Unexpected Outperformance in NODX

SGD: Limited Impact From Unexpected Outperformance in NODX

      Mar NODX surprised on the upside, rebounding by 18.5% y/y from Feb’s -9.7% vs. expectations of -1.1%, a level not seen since Feb 2012. The outperformance was helped by a bounce in electronics and pharmaceutical shipments, which rose 10.4% and 65.9% y/y respectively.  On a m/m sa basis, exports jumped 23.0% in Mar from 9.4% in Feb.

      The surprise outperformance in Mar, while not necessary a bellwether of things to come on the external front, will put into focus the industrial production numbers that will be released on 24 Apr. Recall that manufacturing fell 3.4% y/y (-2.3% q/q sa) in the flash estimates for 1Q15, and this could lead to expectations of an upward revision to both manufacturing and GDP prints.

      However, it is still too early to signal a recovery in trade performance going forward for several reasons. First, the outperformance in Mar was supported by a rebound in pharmaceuticals, which tends to be lumpy. Shipments of pharmaceutical products could just as easily reverse in the coming months. Second, this is only one data point and we need to see a more consistent pick-up in NODX ahead for greater optimism of an uptrend.

      Until we see a more enduring uptrend in NODX, we do not expect this unexpected outperformance to have a significant impact on the USD/SGD going forward. Instead, focus will remain on the US data releases, its impact on the ongoing view on the Fed funds rate and eventually the dollar, which is still likely to drive the USD/SGD higher in the months ahead. Our preference remains to accumulate on dips; interim support at 1.3470 (100DMA) should hold with a risk of an under-shoot towards 1.3420 in the short-term.