Singapore: Growth picks up, inflation stays stable – Nomura

Analysts at Nomura note that the final reading of Singapore’s Q3 2017 GDP growth was revised up to a better-than-expected 5.2% y-o-y from the advance estimate of 4.6%.

Key Quotes

“Core inflation was broadly stable at 1.5% y-o-y in October from September, as was headline inflation at 0.4%.”

“Does this change your economic view? Yes. We raise our 2017 GDP growth forecast to 3.2% from 2.8% and see upside risks to our 2018 forecast of 1.9% as well. Our higher 2017 forecast still implies growth slowing to 2.4% in Q4, and we expect that trend to continue into 2018.”

“Strategy implications? A Monetary Authority of Singapore (MAS) shift in FX policy to an upward slope in April 2018 still looks unlikely in our view, and we would look to trade S$NEER in a +0.5 to +1.5% range (above the mid). However, we believe the probability of an FX tightening in October 2018 will only increase if growth remains strong and broadens out. We assign around a 35% probability of the MAS increasing the slope of FX appreciation in October 2018. We maintain our view that SGD rates will outperform US rates. Yesterday’s better-than-expected activity data and stable inflation support our bias. We continue to express this view through receive SGD 5yr and 1yrfwd2yr IRS vs US. We also like steepeners (3s10s) with extra receivers in the front end.”