, when

SPORE: Q4 2012 GROWTH

SINGAPORES FLASH Q4 2012 GDP GROWTH

Wednesday, January 02, 2013 Singapore escaped a technical recession again, with Q4 GDP flash estimates at +1.8% qoq saar. The Singapore economy grew by 1.1% yoy (+1.8% qoq saar) in Q4 2012 according to flash estimates, which beat our forecast of +0.3% yoy (-4.2% qoq saar). This meant that the Singapore economy escaped a technical recession, as both Q3 and Q2 growth data were also revised lower to 0% yoy (-6.3% qoq saar) and +2.3% yoy (+0.2% qoq saar). Manufacturing was the laggard, while construction slowed, but services surprised on the upside with a Q4 rebound.

Corporate FX & Structured Products

Tel: 6349-1888 / 1881

Manufacturing momentum was the main drag at -0.2% yoy in 2012, marking another contraction in Q4 at -1.5% yoy (-10.8% qoq saar), which reflected the continued weakness of the electronics cluster. Construction also declined 8.9% qoq saar in Q4 due mainly to the decline in private sector building activities. The silver lining is that the services industries rebounded 7.0% qoq saar (+1.5% yoy) in Q4 after shrinking 17.4% qoq saar (+0.2% yoy) in Q3, led by the rebound in wholesale & retail trade, finance & insurance sectors, which is reflective of the tightness in the domestic labour market and the tentative green shoots emerging in the regional economies, including China. We still look for around 2% growth in 2013, even with a sluggish H1. Our 2013 GDP growth forecast is 2% yoy, an improvement from the 2012 full-year growth of 1.2% yoy, albeit H1 momentum may still be modest even though Q4

Fixed Income & Structured Products

Tel: 6349-1810

Investments & Structured Product

Tel: 6349-1886

Interest Rate Derivatives

Tel: 6349-1899

Treasury Research & Strategy

Tel: 6530-4887

Selena Ling
+65 6530 4887 lingssselena@ocbc.com
0H

momentum had reaccelerated from Q3 which was the trough of the downcycle in 2012 as we predicted. We expect a tepid H1 growth of around 1.2% yoy to gradually pick up some speed in H2 2013 to around 2.9% yoy. Domestic asset prices remained buoyant into the year-end. Spores private home prices climbed 1.8% qoq to a record 211.90 points in Q4, adding to the +0.6% qoq in Q3 2012, and bringing full-year gains to +2.8% yoy versus +5.9% yoy in 2011. Non-landed private home prices rose 0.8% qoq in Q4, while suburban prices surged 3.4%. However, business sentiments are showing some tentative signs of caution although overall bank loans added 0.5% mom in

2 January 2013
Nov, business loans moderated 0.4% mom even though manufacturing and building/construction loans continued to be resilient. Consumer loans rose 1.7% mom, boosted by housing loans. Yearto-date for 2012, total bank loans growth is chugging along at close to 22% yoy. Domestic challenges still remain, namely on the inflation front amid a weak external demand environment. Looking ahead, we expect the domestic interest rates to remain subdued given the major G7 central banks remain in easing mode, but global food prices and other inflationary pressures will likely sustain domestic headline CPI inflation to be still in the 3-4% yoy range in the meantime. So far, the gradual growth recovery story coupled with the still elevated inflationary environment may mean little impetus to deviate from the current monetary policy stance in the near-term, especially with the SGD NEER still hugging the stronger end of its parity band for now.

Modest expectations for upcoming Budget? Domestic companies still face a tepid external demand environment, while domestic cost pressures remain. The upcoming Budget, likely in February 2013, may offer some relief to SMEs, but the foreign manpower curbs and the productivity push are likely to remain mainstays, especially with global tail risks subsiding. For the man on the street, keep an eye on potential tweaks to housing and COE policies that have been in the news of late.

Source: MTI, OCBC

Treasury Research & Strategy

This publication is solely for information purposes only and may not be published, circulated, reproduced or distributed in whole or in part to any other person without our prior written consent. This publication should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities/instruments mentioned herein. Any forecast on the economy, stock market, bond market and economic trends of the markets provided is not necessarily indicative of the future or likely performance of the securities/instruments. Whilst the information contained herein has been compiled from sources believed to be reliable and we have taken all reasonable care to ensure that the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee and we make no representation as to its accuracy or completeness, and you should not act on it without first independently verifying its contents. The securities/instruments mentioned in this publication may not be suitable for investment by all investors. Any opinion or estimate contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. This publication may cover a wide range of topics and is not intended to be a comprehensive study or to provide any recommendation or advice on personal investing or financial planning. Accordingly, they should not be relied on or treated as a substitute for specific advice concerning individual situations. Please seek advice from a financial adviser regarding the suitability of any investment product taking into account your specific investment objectives, financial situation or particular needs before you make a commitment to purchase the investment product. OCBC and/or its related and affiliated corporations may at any time make markets in the securities/instruments mentioned in this publication and together with their respective directors and officers, may have or take positions in the securities/instruments mentioned in this publication and may be engaged in purchasing or selling the same for themselves or their clients, and may also perform or seek to perform broking and other investment or securities-related services for the corporations whose securities are mentioned in this publication as well as other parties generally
Co.Reg.no.:193200032W