SINGAPORE - Singapore could be the canary in the coal mine as the outlook for Asia's exports worsens.
Chief financial officers in the city-state are the most pessimistic in the region when it comes to profits this year, according to a survey by Bank of America Merrill Lynch. In the poll of 630 CFOs, 37 per cent of those in Singapore said they expected earnings to grow in 2015, about half the regional average.
A weak global environment and sluggish domestic market are driving the negative sentiment, according to the bank. Four-fifths of Singapore CFOs also cited US interest-rate movements as a key risk this year, while about half said they were considering a change in their China strategies.
Singapore's exports were one-and-a-half times its gross domestic product last year, the highest share in Asia except for Hong Kong. The small and open economy is sometimes seen as a bellwether for the region, especially as it tends to report monthly trade data earlier than its neighbours.
"It's the most open and trade-oriented economy in the region and it's impacted by the vagaries of the global trade cycle," said Michael Wan, a Singapore-based economist at Credit Suisse Group AG.
"The CFOs could be looking at the outside world from the lens of a regional headquarters," he said.
Granted, there are domestic factors weighing on corporate leaders' minds in Singapore. Most significantly, the government has slowed the inflow of cheap foreign workers since 2010, resulting in a labour crunch that has raised business costs.