Singapore’s grim outlook is cause for concern

Although the Singaporean economy (EWS, quote) grew 10% year on year for the first quarter of 2012, this southeast Asian economy is starting to feel the pain of global economic woes.

The Singapore economy is highly reliant on exports because of its prominent technology industry and a thriving transport sector.

Like many other emerging market economies, Singapore is suffering from a substantial decrease in demand as the result of concerns over the euro zone.

As a result, most pundits agree it’s unlikely the Singaporean economy can continue to grow at such a pace over the next year.

Euben Paracuelles, an economist for Nomura in Singapore, claims that “(i)t’s hard for Asia to escape the repercussions if there’s a European recession and it’s accompanied by financial market instability and a banking crisis.”

Going forward, the situation for economies like Singapore is difficult to discern until there is clarity from the European quagmire. As a result, investors should hesitate going long Singaporean equities at these levels.

As well, traders should stay short export-dependent economies in east Asia like Singapore, Thailand (THD, quote), and South Korea (EWY, quote) until the future of the peripheral economies of Europe becomes clear.

EWS is down 1% in today’s trading.


Leave a Reply