The bank says this partly reflects a slight dip in the world trade cycle, although the impact of currency appreciation over the last couple of years is also taking its toll to varying degrees. It says Singapore exports appear to be particularly sensitive to exchange rate moves, perhaps helping to explain why they have slowed more than most.
HSBC constructed a number of models to explain export growth in the different ASEAN countries. It also constructed composite lead indicators of external demand. The latter, which incorporate a combination of regional and global variables, have worked extremely well in the past and suggest that export growth in most of the economies is now bottoming. ThatÆs the good news. The bad news is that the recovery this year looks likely to be tentative.
The bank notes that as a generalisation, world trade growth is expected to slow a little further in the first half of this year, before picking up modestly in the second half. Meanwhile, the exchange rate effects continue to be a negative for exports. The net result for the ASEAN-5 average is that export growth basically flattens out at around 5%. That suggests that there shouldnÆt be a huge amount of downside for exports going forward. However, the bank also points out that the prospects for a strong near-term bounce look equally remote.
Who could be a winner? Indonesia. HSBC models suggest that Indonesia will enjoy the strongest export growth, benefiting from its relative lack of exposure to the United States, with Thailand likely to be the worst performer, largely as a result of the lagged effects of the bahtÆs appreciation.
"We expect the ASEAN currencies to strengthen further against the US dollar this year and although this is partly a soft dollar story, signs that export growth is stabilising should encourage the policy authorities to be slightly less interventionist. Currency appreciation should keep a firm lid on inflation in these very open economies, maintaining the downward pressure on short-term interest rates," the bank wrote in a research report released on April 4.