Will Singapore survive a suffering export market?



Singapore's industrial production unexpectedly declined in April, the biggest drop in 10 months, as drug companies and electronic manufacturers reduced output.

Manufacturing, which accounts for a quarter of Singapore's economy, fell 5.7 percent from a year earlier, following a revised 18.1 percent gain in March, the Economic Development Board said today. Analysts predicted a 6 percent increase. Economists have warned that manufacturers in Singapore and across Asia face easing demand amid signs of a slowdown in the U.S., the region's largest export market. Singapore's trade promotion agency last week lowered its forecast for export growth this year to between 2 percent and 4 percent, from an earlier range of 4 percent to 6 percent.

"External demand is still weak and that doesn't bode well for Singapore's production in coming months,'' said Alvin Liew, an economist at Standard Chartered Plc in Singapore. "Manufacturing is likely to be badly hit.''

Industrial production fell a seasonally adjusted 16.2 percent in April from the previous month, after a revised 0.4 percent gain in March, today's report said. Economists were expecting a 5.5 percent decline. Pharmaceutical output fell 27.9 percent in April from a year earlier, after more than doubling the month before. Drugs make up around 22 percent of Singapore's manufacturing and electronics account for about 30 percent. Singapore's industrial output tends to fluctuate from month to month because of swings in production by drug companies which shut plants for cleaning before making different products.

Electronics production dropped 5.1 percent last month from a year earlier, following a revised 3.4 percent decline in March. The island's electronic exports have declined for 15 months.
Computer chip production in Singapore fell 7.4 percent in April from a year ago, from a revised decline of 6.7 percent the month before. Transport engineering output, which makes up more than a 10th of total manufacturing, gained 7.7 percent in April from a year earlier after advancing a revised 7.3 percent in March. Singapore's marine engineering companies such as Keppel Corp. and smaller rival SembCorp Marine Ltd. have won contracts worth billions of dollars for ships and oil rigs as record crude prices encourage companies to increase exploration. Oil prices reached $135.09 a barrel this month, and prices have doubled in the past year.
Production at marine and offshore engineering companies rose 15.1 percent, while aerospace-related output gained 1.7 percent last month.
Should Singaporean exporters already consider downsizing as foreign markets dwindle?

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High Inflation, High Cost of Operations, High Prices. Is There A Way To Fight This Vicious Cycle?

Singapore's consumer price inflation likely hit a new 26-year high in April as food and energy prices showed no signs of cooling.

A poll of economists forecasts the consumer price index to have risen 7.0% from a year earlier. In March, the CPI rose 6.7%.

Forecasts for the data, due Friday at 0500 GMT, ranged from 6.7% to 7.3%.

Economists said rising energy prices led to higher pump and utilities prices, while a global rice shortage caused the price of the grain to surge.

"Petrol companies raised pump prices by three and five cents a liter for petrol and diesel respectively," said Leon Hiew, an economist at Citigroup in Singapore.

Global rice costs have risen by 80% over the past three months, added Hiew. World Bank Managing Director Juan Jose Daboub said recently that prices are unlikely to fall soon unless an additional million tons of rice is released into the global market in the near term.

According to Hiew, inflation is unlikely to cool until the second half of the year.

"We expect CPI to stay within the 6.5% to 7% range in the second quarter before moderating to average around 4.5% in the second half," Hiew said.

The poll also forecasts the CPI to have risen 0.6% from March in seasonally adjusted terms, after rising 0.3% the previous month.


Will the Singapore Government Step And Introduce Policies to Combat the Inflation?

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Are the Record Oil Prices the Sole Reason for SIA’s Dip in Profits?


Singapore Airlines Ltd., the world's second-largest airline by market value, dropped to the lowest in two weeks on the city's stock exchange amid concerns that record oil prices will damp profit.

The carrier fell 1.7 percent to S$15.52 in Singapore trading, closing at its lowest since April 24.

Singapore Airlines, Cathay Pacific Airways and other Asian carriers face shrinking margins as an economic slowdown crimps demand and jet-fuel costs surge in line with rising oil prices. Crude oil climbed 1.4 percent to $123.53 a barrel in New York yesterday, the highest close since trading began in 1983.

“Jet-fuel costs may get the better of Singapore Airlines in the coming financial year,” Citigroup analyst Robert Kong said in a note. This is especially likely ‘if softer traffic growth and lower load factors later in the year weigh on passenger yields.’

The Singaporean carrier yesterday said that it will raise surcharges as much as $20 a flight next week in bid to offset surging fuel costs. Jet fuel accounted for almost 37 percent of its costs in the quarter ended Dec. 31.

Cathay Pacific, Hong Kong's biggest airline, yesterday said it may raise its ticket levies further. Cathay Pacific rose 0.1 percent to HK$16.24 in Hong Kong after falling as much as 1.4 percent earlier.

Air China Ltd., the world's biggest carrier by market value, dropped 2.2 percent to HK$5.72 in Hong Kong trading. China Southern Airlines Co., the country's biggest airline by sales, slipped 2 percent to HK$4.97 in the city.


Will Raising Surcharges Indeed Help Offset the Cost of Operations, or Will it Cause Air Travellers to Switch to other Airlines?

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How Long Will Emerging Markets Be Able to Contribute to ST Engineering’s Bottomline?


Singapore Technologies Engineering, Asia's biggest aircraft maintenance company, said first- quarter profit rose 13 percent as it serviced more planes and increased sales of defense and specialty vehicles.

Net income increased to S$122.5 million ($90 million), or 4.10 Singapore cents a share, from S$108.8 million, or 3.68 cents, a year earlier, the company said in a statement to Singapore's stock exchange. Sales climbed 8 percent to S$1.32 billion.

Economic growth in China and India is making air transport more affordable for passengers, prompting airlines such as AirAsia and Singapore Airlines to add flights and aircraft. Orders at Singapore Technologies' aerospace division, its biggest business, rose as carriers farmed out maintenance services to cut costs and converted passenger aircraft to cargo planes.

“We have the order book to help us grow our business,” Chief Executive Officer Tan Pheng Hock said. “We want to rationalize our business so we'll come out stronger next year.”

ST Engineering's orders reached S$9.19 billion at the end of March, according to the company. The company adjusted its order book to eliminate a contract received from Skybus Airlines after the U.S. low-fare carrier filed for bankruptcy in April, Tan said. Orders were S$9.49 billion at the end of 2007.

The company expects a “modest growth in turnover and profit before tax this year,” Tan said.

Pretax profit at the aerospace division rose 4 percent to S$82.6 million in the first quarter, while the land systems business gained more than a third to S$32.9 million.

ST Electronics had a pretax profit of S$20.1 million, 9 percent less than a year earlier. ST Marine, which counts the U.S. Navy and the U.S. Coast Guard among its customers, posted a 10 percent decline in pretax profit to S$17.4 million.

ST Engineering closed unchanged at S$3.21 before the earnings announcement. The stock has fallen 14 percent this year, compared with a 6.3 percent decline in the Singapore benchmark Straits Times Index.


Will the price of ST Engineering’s share bounce off and increase in light of the positive news?

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