Asian markets opened in cautious mode on Monday, despite a record session on Wall Street last Friday.

China’s 2Q GDP is due to be released and markets foresee the growth rate of the world’s second largest economy to continue its downward trajectory from 6.4% to 6.2% in the first quarter.

Friday’s China trade data points to a further deterioration in imports (-7.3%) while exports (-1.3%) dropped by a smaller magnitude, causing the trade balance to widen to US$ 50.9 billion. The trade data reveals the prevailing economic risk associated with the US-China trade disputes, which in turn make it tougher for policymakers to maintain growth in a global downturn.

Singapore, one of Asia’s most open and vibrant economies has shown early signs of a recession that could kick in as soon as 2H19.

The flash estimate of Singapore’s 2nd quarter GDP came in at a big miss. The yoy growth rate of 0.1% (versus 1.1% forecast) is the lowest reading since the global financial crisis back in 2009. As a result, the risk of a technical recession as defined by two consecutive quarters of slowdown, is on course for rising. This is mainly due to a deepened global cyclical slowdown in the manufacturing sector and heightened trade frictions between the US and China.

The manufacturing sector is the main drag of Singapore’s growth in the 2nd quarter, contracting by annualized pace of 3.8% yoy. Although construction and the service sector demonstrated resilience against the downturn, their rate of growth has also moderated in Q2. Singapore’s trade outlook is deteriorating alongside manufacturing PMI readings.

Singapore is not a standalone case. If we look at the rest of the Asia Pacific region, many economies are facing similar headwinds, for example South Korea, Taiwan, HK and Australia.

Monetary and fiscal support might be needed to foster growth into the 2H, against the backdrop of deteriorating global fundamentals and trade risk. In fact, many central banks have already started to cut down interest rates or are planning to do so.

Going forward, the cyclical downturn of the manufacturing sector is likely to extend and the trade risk between the US and China remain high, considering the lack of progression in the trade talks after the G20 summit.

In the stock market, although the benchmark index STI was lifted by hope of a dovish Fed, the manufacturing sector was generally trading lower on Friday due to concerns of prevailing weakness in exports and trade.

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