CGS International analysts Lock Mun Yee and Lim Siew Khee see that a win by former US president Donald Trump this November may mean a “near-term boost” but a “slower long-term growth outlook”.
Should Trump win his second term in the White House, this could mean continued tax cuts and deregulation, as well as increased investments in infrastructure. All of these may lead to creating jobs, the boosting of private consumption and stimulating US economic growth. These factors, in turn, may lead to further imports, escalation of trade and tech wars, as well as rising trade tariffs such as the discussed proposals to impose a 60% trade tariff on China and a 10% global tariff. The tariffs, in the longer term, could reduce global trade and affect global growth amid elevated inflation.
With Singapore’s open economy, the country could be negatively affected by the heightened challenges in global trade although this may be partly mitigated by the city-state’s strong trade relations with the US.
“Singapore remains the only Asean country with a free trade agreement (USSFTA) with the US to date,” the analysts point out. “According to the Bureau of Economic Analysis, the US trade balance with Singapore stood at US$28.4 billion ($38.2 billion) surplus in 2023.”
“Furthermore, if the proposal for a 60% tariff on China is introduced versus a lower global tariff of 10%, and put in place, this could potentially divert supply chain shifts from North Asia into Asean,” they add.
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To Lock and Lim, a Trump win could benefit sectors such as banks, some companies in tech manufacturing, the capital goods sectors and telecommunication companies (telcos).
“Trump's potential win could imply fewer rate cuts in total, or a more delayed cut timeline,” the analysts note.
Naturally, higher-for-longer rates could bode well for the financial sector but it may come at the cost of a pick-up in growth.
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“While net interest margins (NIMs) should sustain at a new normal high, the pick-up in wealth management and loan growth could slow. As long as the interest rate outlook remains unclear, we think treasury income may still benefit from the volatility,” say Lock and Lim.
The higher tariffs imposed on made-in-China products will drive manufacturers’ China-plus-one strategy with Malaysia’s Penang and the Johor-Singapore special economic zone (SEZ) and Indonesia’s Batam likely to be beneficiaries.
“Higher China tariffs could also mean shifts to lower operating costs countries such as Malaysia and Indonesia”, the analysts add.
With that, Singapore-listed companies such as AEM, Frencken and Venture Corp, which have most of their factories in Malaysia, could benefit from the win. In contrast, companies like Aztech and Nanofilm could face challenges as they have larger manufacturing presence in China.
The shifting of supply chains into Asean could see stronger demand for the telcos such as Singapore Telecommunications Z74 (Singtel).
“The group has large Asean telco exposure via its regional associates in Indonesia, Thailand and Philippines, as well as from its data centre projects,” note Lock and Lim.
Meanwhile, companies like CSE Global 544 could benefit from higher demand for systems integration for energy projects as higher oil-related capital expenditures (capex) by US large players could potentially drive large energy greenfield order wins.
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Singapore Technologies Engineering (ST Engineering) may also benefit from higher military spending.
On the other hand, risks of slower global trade may impact Singapore Airlines C6L (SIA) and SATS due to weakened demand for air freight. However, this may be offset by a rush to beat the tariffs and see a re-routing of trade routes.
Protectionist measures from the US government may also see Chinese e-commerce players like TEMU moving into other regions like Southeast Asia, which could potentially affect Sea Limited.
Finally, Yangzijiang Shipbuilding may see negative impact from a potential lower order momentum should higher port fees on Chinese-built ships be implemented, which could mean higher market share for Korean ships.
