Latest / The Emerging Markets Podcast with Fexingo: Developing Economies, Growth, and Investment / How Singapore Is Quietly Becoming an Emerging Markets Bellwether
Transcript
- Lucas: So Singapore reported inflation for April this morning — came in at 1.8 percent, which was actually lower than the market expected. Luna: That's notable because a lot of emerging markets are still wrestling with sticky inflation above their central bank targets. Lucas: Right. And at the same time, the government revised its first quarter GDP growth higher. So you have this combination — disinflation happening without a growth sacrifice. That's a pretty rare combo right now in emerging markets. Luna: It almost feels like Singapore is playing a different game than the rest of the EM pack. What's driving that? Lucas: Part of it is structural. Singapore is a highly open economy — trade is about three times GDP. So when global demand softens, you'd expect it to get hit. And it did, briefly, in late 2025. But the recovery has been faster than expected, largely because the composition of its exports has shifted. Luna: Shifted toward what? Lucas: Pharmaceuticals, specialty chemicals, and advanced electronics — things that are less cyclical than, say, basic commodities or consumer goods. So even as the rest of Asia sees a slowdown, Singapore's export numbers are holding up. The trade data we just got for January shows exports of goods and services at three point five trillion — up from the prior period. Luna: And that's in a context where the trade-weighted dollar is still strong — it's at 119.3 on the index. Usually that crushes small open economies. Lucas: Exactly. The strong dollar has been a headwind for most emerging markets — you've seen that in the EEM and VWO numbers over the past year. But Singapore manages it partly through its exchange rate policy. The Monetary Authority of Singapore manages the Singapore dollar against a basket of currencies, not just the US dollar. And they've kept it relatively stable — the Singapore dollar has actually appreciated a bit against the greenback over the past twelve months. Luna: That's a contrast with places like China, where the yuan has weakened — it's at 6.81 per dollar now. A weaker yuan is supposed to help exports, but it also creates capital outflow pressures. Lucas: Right. And China's tech rout is clearly not helping. You look at KWEB down over four percent in the last five days, Baidu down seven percent. That's dragging on the broader EM China exposure. But Singapore's stock market is less exposed to tech and more to banks, real estate, and industrials. So it's not getting that same headwind. Luna: And oil prices falling five percent on the Iran talks — that's actually a net positive for Singapore, right? It's a major oil refining and trading hub. Lucas: Huge positive. Lower oil prices reduce input costs across the economy — transport, manufacturing, petrochemicals. Singapore's refining margins might take a short-term hit, but the broader macro effect is disinflationary and supportive for growth. The Carlyle analyst saying oil markets are at 'tank bottoms' in Asia — that paints a picture of weak demand, but for Singapore it's more about the cost side. Luna: So if Singapore is this bellwether, what does it tell us about the rest of emerging markets? Is it a leading indicator or an outlier? Lucas: I'd say it's a useful signal but not a perfect proxy. Singapore has unique advantages — a very credible central bank, a legal framework that attracts capital, and a workforce that's highly skilled. But the fact that it's growing while inflation falls suggests that the global demand picture might not be as dire as the China headlines make it seem. If Singapore can pull this off, maybe some other trade-dependent EMs can too — places like Vietnam, Malaysia, maybe even Thailand. Luna: Thailand's ETF is up over five percent in the last five days, actually. So maybe there's some spillover optimism. Lucas: That's a good point. And it also matters what the US does next. If the dollar stabilizes or weakens, that's a tailwind for all emerging markets. The Federal Reserve is in a wait and see mode right now, but the market is pricing in rate cuts later this year. If that happens, capital flows back into EMs, and Singapore would be one of the first ports of call. Luna: Looking at the trade balance data — the deficit widened to about 60 billion in March. That's something to watch. Even a resilient economy can't ignore a growing trade gap forever. Lucas: True. But that's a goods-only measure. When you include services — which Singapore exports heavily in finance, logistics, and tourism — the current account is still in surplus. The current account deficit actually narrowed recently, from 239 billion to 190 billion. So the overall external position is still solid. Luna: What about the property market? That's always a risk in Singapore — if rates stay high, leveraged households could feel the pinch. Lucas: That's a real risk. The government has been cooling the property market with additional stamp duties and loan limits. So far it's working — price growth has moderated. But if global rates stay elevated for longer, you could see a sharper correction. That's the main downside I'm watching. Luna: So to sum up: Singapore is this interesting test case of whether a small, open, well-managed economy can decouple from the broader EM malaise. The early data says yes, but it's early. Lucas: Exactly. And it's worth keeping an eye on the next few months — especially the July trade data and the Q2 GDP print. If Singapore continues to outperform, it might force a rethink of how we categorize 'emerging markets' in the first place. Some of these economies are becoming quite mature. Luna: Speaking of keeping things going — if walking through the economy with us has made something click, there's a simple way to help keep these episodes ad-free. A couple of dollars a month genuinely makes a difference. Lucas: Yeah, it's true. Listener support is what keeps this show independent. If you've gotten something out of it, you can find us at buy me a coffee dot com slash fexingo. Luna: Alright, back to the data. Lucas, you mentioned the Q2 GDP print — what specific indicators are you tracking between now and then? Lucas: I'm watching the Purchasing Managers' Index for manufacturing and services, plus the non-oil domestic exports number. Those are the early reads. If those stay above 50, the GDP revision we saw is probably not a one-off. Luna: And if they dip? Lucas: Then the bellwether hypothesis takes a hit. But right now, the evidence is leaning positive. Singapore is giving emerging market investors something to hold onto.