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    Southeast Asia
     Feb 3, 2012

Singapore's gains look fragile
By Robert M Cutler

MONTREAL - A raft of favorable economic statistics was released in Singapore at the end of January, but the latest data point to the possibility of a slowdown in manufacturing activity.

Industrial production in December 2011 unexpectedly grew 12.6% from a year earlier and 7.8% seasonally adjusted over the previous month. This is a significant rebound after November's year-on-year contraction of 9.6% and 25.2% month-on-month decline. The growth in December was centered in the biomedical engineering and transport sectors while electronics production continued to fall.

The latest data for the Purchasing Managers' Index (PMI), released this week, suggest, however, a less positive outlook. The PMI fell to 48.7 in January, 0.8 points lower than December's


49.5, after a gain that month from November's 48.7. The PMI reflects anticipated factory orders and a reading below 50 signals contraction, while one above 50 means expansion.

On Monday, the government's latest Business Expectations Survey found that nearly all sectors in the services sector had a negative outlook for the period to June, with retailers most pessimistic, followed by financial and insurance companies.

The remarkable success of Singapore's two casino resorts meant that the one bright area was the recreation, community and personal services sector, which overall expected their businesses to improve over the next five months.

Singapore is expected to have surpassed Las Vegas as the world’s second-largest gaming market last year, behind only Macau, less than two years after the opening of the city-state's Marina Bay Sands and Resorts World Sentosa resorts. Visitors from China and further afield have flocked to enjoy the resorts' wide range of dining, retail and other activities that are on offer over and above gaming tables.

Singapore's exports grew 9% in December 2011 over December 2010 (non-oil exports only), surprising the consensus to the upside, with pharmaceuticals leading the rise (in addition to high-ticket ship and boat structures), while electronics exports fell 4.6% year-on-year. Export diversification to Asia, where growth continues even if at a generally reduced rate, helped to buck the trend of declining markets in the US and other developed economies.

Estimates for fourth-quarter 2011 gross domestic product (GDP) growth range from 3.5% to 4%, down from a 6.1% GDP growth rate in July-September. The third quarter benefited from a spike in biomedical engineering exports, just as the fourth quarter benefited from a pharmaceuticals export spike. The latest published government expectation for 2012 signals anemic GDP growth, in the 1-3% range.

Singapore's inflation rate, gauged from the consumer price index (CPI), fell to 5.5% in December year-on-year from 5.7% in November, in line with the consensus estimate. The CPI increase for the whole year came in at 5.2%. Leading drivers of the inflation rate are housing, food, and automotive costs. The central bank’s "core inflation" measure includes food but excludes the other two: it was up only 2.6% year-on-year. Unemployment in 2011 fell to a 14-year low as job creation remained strong. The unemployment rate in 2011's fourth quarter was 2%, unchanged from the previous three-month period.

As of early Wednesday morning local time, the Straits Times Index was just below 2,900. It has spent the last five months in the same 2,650-2,950 trading range, with the exception of a few days in early October last year that saw it dip down into the 2,500s. The 2,950 level also happens to mark almost exactly the midpoint of the index's post-crisis recovery trading range (based July 2009) with a post-crisis high in the high 3,100s achieve in early February and early August last year.

The Straits Times Index is thus in a situation congruent to the MSCI Asia Pacific Index, which, now near 123, is at the midpoint within the second of its three contiguous post-crisis trading ranges. The present level of the Singapore equity benchmark at 2,900 is also the level of a static short-term resistance. Short-term technical indicators have been generally favorable but have begun to fade so far this week.

Above 2,900 there is still the medium-term resistance at 2,950, which is in turn surmounted by long-term resistances at 3,130 as well as several weaker resistances on the way to get there. Thus, like the MSCI Asia Pacific Index, the Straits Times Index will encounter its next significant technical resistance at a level about 5% above where it now stands, if it manages to get there.

Singapore’s overall economic performance for December, as for the whole of 2011, must be considered relatively good news by the ruling People's Action Party (PAP), which the Singaporean electorate shocked last May by giving it only 60% of the vote, its lowest percentage in its 45-year rule, despite which the government 81 of the 87 parliamentary seats up for election.

The election of Tony Tan Keng Yam to the mostly ceremonial office of president of Singapore in August 2011, which he won by a mere 0.34% (7,269 votes of out over 2.1 million cast), may also be interpreted as a gentle rebuke to the ruling PAP, as his campaign emphasized his differences over particular polices from the PAP government.

The economic news for December may serve as a mild distraction of public attention from the ongoing scandal that led, over last month's Lunar New Year, to the dismissal of Peter Lim Sin Peng as commissioner of the Singapore Civil Defense Force and Ng Boon Gay as director of the Central Narcotics Bureau for "serious personal misconduct".

According to a Jakarta Globe reprint of an article attributed to Straits Times Indonesia, it is believed that a married information technology executive, while in a previous job with a Japanese multinational company, had sex with each of the men, each unbeknownst to the other. She is reported now to be assisting the Corrupt Practices Investigation Bureau in its investigation of them, which began four to six months ago.

Dr Robert M Cutler (http://www.robertcutler.org), educated at the Massachusetts Institute of Technology and The University of Michigan, has researched and taught at universities in the United States, Canada, France, Switzerland, and Russia. Now senior research fellow in the Institute of European, Russian and Eurasian Studies, Carleton University, Canada, he also consults privately in a variety of fields.

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