Singapore market monitor - Essential bites – what we learnt
Invest ASEAN 2017 – post-conference takeaways
- In this report, we highlight some big-picture key messages from expert speakers at the conference that provide fodder for thought.
- At the micro level, our interaction with the Singapore-based company attendees (and some from other ASEAN countries too) suggest a mood of cautious optimism as most expect a better year compared to 2016.
- The key concerns echoed by a number of the attendees centre around margin pressure given the combination of higher competitive intensity and a bottoming of commodity prices that is likely to increase input costs.
The times they are a-changin’
- The content from expert speakers at various plenary and industry track sessions point to a wave of change affecting many industry segments in the region.
- Nationalistic agendas within parts of ASEAN are rising, driven by the anti-globalisation trends in the West - Indonesia was mentioned as potentially considering measures to safeguard domestic economy and employment.
- The non-tariff stumbling blocks to ASEAN integration would likely rise in the auto, agri, metals and mining sectors.
- On the flipside, the momentum for integration, while slow, was still positive in Thailand and Vietnam while Malaysia was singled out for making good progress in developing the digital economy.
- On the trade front, US border tax has a high probability of being pushed through and, while RCEP would be positive, it would not accomplish what TPP possibly could have.
- In manufacturing, with 3D printing costs falling rapidly, widespread adoption could be a significant cost deflator across the value chain.
- In logistics, the highest growth is being witnessed in the perishables and pharma warehousing and transport space.
- And with an estimated > 1% of total retail sales in the region from e-commerce, the potential for e-retail channel growth could be as high as 10-fold in the coming decade.
Singapore firms cautiously positive
- While it is a bit tricky to aggregate the outlook of the attendees as they were spread across a disparate range of sectors, we came away with the overall impression that companies were more optimistic about 2017 than last year.
- Sound-bites include the belief that the government would not sell new hotel sites in the near term to manage the supply situation, credit spreads are tighter than a year ago despite rising SIBOR, business parks are seeing new demand from the back offices of banks and hope that the pick-up in economic data recently is sustainable.
Competition, margin protection the key concerns
- The challenge to protect margins cropped up frequently driven by a number of underlying factors. These include the risk of increase in debt funding costs from rising rates, the anticipated increase in input costs from a bottoming of commodity prices and an increase in competitive intensity across sectors given the tepid demand growth of the past 12-18 months.