Singapore manufacturing turned up in December

Singapore's manufacturing slowdown appears to have been arrested, at least for December.

Monthly Manufacturing Performance - December 2004
Manufacturing output for December went up by 31.7% compared to December 2003. This high growth was due mainly to a substantial increase in output by the biomedical manufacturing and transport engineering clusters. Excluding the biomedical manufacturing cluster, December's output increased by 7.4% over December 2003. The three-month moving average for total manufacturing output grew by 14.1%. The seasonally adjusted month-on-month growth for December was 19.4%. Total manufacturing output for 2004 grew by 13.9% over 2003.

The strong performance in December has led some economists to think that Singapore's economic growth for 2004 will turn out to be higher than the 8.1 percent previously forecast.

The outlook going forward, however, remains uncertain. With the electronics sector still slowing, Singapore's manufacturing is becoming increasingly dependent on the volatile biomedical sector.

The problem for investors is that while there are many electronics stocks listed on the Singapore stock exchange, there are very few biomedical stocks. The stock market is more likely to be affected by the fate of the electronics sector than that of the biomedical sector.

Nevertheless, I am relatively sanguine about electronics stocks in Singapore, at least relative to the rest of the market. Much of the gloom in the sector has been discounted, with the Electronics Index having fallen 7 percent last year, and falling further in 2005 so far, both in contrast to gains in the broader market. Top electronics stock Venture Corporation, for example, currently trades at a price-earnings ratio of about 16 -- at the low end of its historical trading range.

I suspect that if electronics stocks suffer again in 2005, the broader market may not be spared this time.