SINGAPORE (July 1): US President Donald Trump and Chinese President Xi Jinping’s impending Osaka G20 meeting is one to watch, but market commentators are not expecting any significant breakthrough. At the very least, they would be happy that talks between the world’s two largest economies have not broken down.
“The meeting could help ease bilateral relations and move the current conflict in the direction of an eventual agreement,” says Tuan Huynh, chief investment officer for emerging markets at Deutsche Bank Wealth Management. Following the meeting on June 28 and 29, he expects the US and China to focus on specific issues such as protection of intellectual property rights and subsidies for China’s state-owned enterprises and agricultural industry.
Similarly, Esty Dwek, head of market strategy at Natixis Investment Managers, thinks the talks will proceed “nicely” but that no deal will be reached. She expects the US to put on hold the tariff hike from 10% to 25% on all imports from China while leaving the door open for talks to continue.
“Trump has no incentive to make a deal right now, as being ‘tough on China’ is a good political move,” says Dwek. “With US equities near all-time highs and the US economy still solid, the cost for Trump remains small. Moreover, with the Fed now in full dovish mode, Trump’s safety net remains intact for the coming months, and he will continue to push his narrative,” she adds.
On the other hand, China is seen as having the luxury to be patient as well. It has enough ammunition to stimulate its own economy to offset the negative effect of the trade war. “So far, data has softened, but [the economy] is holding up, as support measures seem to be bearing fruit. In addition, Xi cannot be seen to be bowing to the US or making a deal in which only China is making concessions,” says Dwek, who expects the standoff to be resolved only at year-end or even next year.
Phillip Futures analyst Samuel Siew believes market sentiment will remain “fragile”. “Eyes will remain on how the US tariffs are affecting the global trade scene, as well as the impact of potential tariffs on global economic growth,” he says.
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Naturally, Singapore is affected. Government leaders have joined private sector economists in warning that the city state is feeling the impact of the trade war — and it is negative. Singapore’s economy will probably experience a “shallow technical recession” in 3Q as the global trade outlook worsens, hurting its trade-reliant economy, say Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye.
“Disruptions to the supply chain will likely intensify as the trade war broadens to tech and the US imposes export controls on more Chinese tech firms,” they write in a June 27 note. Just the day before, Singapore reported weaker-than-expected industrial production numbers for May, with the electronics sector in particular badly hit.
Maybank sees Singapore’s economy growing at just 1.3% this year, down from its earlier forecast of 1.6%. The revised forecast is lower than the government’s current forecast range of 1.5% to 2.5%.
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Investors seem to have got used to the deluge of bad news. The Straits Times Index closed on June 27 at 3,328.4 points, up 0.82%. Since the start of the year, the index has gained 8.33%.
Active stocks
This past week, privatisation offers for two Singapore-listed companies were rebuffed. On June 25, Indofood Agri-Resources said it received valid acceptances for its 32.75 cent per share offer amounting to 88.08% — shy of the 90% mark needed to take the palm oil company private. On June 27, minority shareholders of consumer electronics retailer Challenger Technologies mustered 11.36% of the votes at an extraordinary general meeting to block a voluntary -delisting bid led by its controlling shareholder, the Loo family, in concert with Dymon Asia Private Equity.
Singapore Telecommunications, one of the country’s largest companies, was actively traded. On June 26, the company released its annual report in which it disclosed that its top management team suffered pay cuts of up to more than 40% for the financial year ended March 31.
In addition, Singtel has given a strong indication that something would be done about its portfolio of loss-making digital businesses acquired at a significant cost over the past few years. They include cybersecurity firm Trustwave and digital marketing businesses Amobee and Videology. “Your board is aware that the value of these investments is not being recognised in our share price, and management intends to unlock this value at the appropriate time,” Singtel chairman Simon Israel said in his message to shareholders. Singtel closed on June 27 at $3.48, down 0.57%.
Other actively traded stocks this week were mainly a clutch of small caps. IEV Holdings, a much beaten-down stock, sprang to life last week. On June 25, IEV, which is in engineering, announced that it was in talks with unrelated third parties to transform itself into a company that focuses on healthcare and wellness. IEV shares closed on June 27 at three cents, up 66.67%.
Engineering firm TEE International, which is also in property and infrastructure, was actively traded during the week. It recently announced that it had sold 15 out of 48 units at its current property project Lattice at an average selling price of $1,800 psf. “We believe TEE should have no problem selling the rest of its development properties, as all of them are [of] freehold tenure,” says KGI analyst Joel Ng, referring to its two other existing projects. TEE International closed on June 27 at 8.6 cents, up 4.88%.
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E-commerce firm Synagie Corp gained significantly during the week as well. On June 24, the company announced that it had been appointed as the so-called Cross-Border eCommerce Initiative Partner by Malaysian government agency Malaysia Digital Economy Corporation. This appointment is part of the Malaysian government’s push to grow e-commerce into a sector that contributes RM211 billion ($66.l4 billion) to its economy by 2020. Synagie closed on June 27 at 17.7 cents, up 6.63%.
Genting Singapore was given a bullish call by CGS-CIMB. On June 21, analyst Cezzane See continued to rate the casino operator an “add”, with an unchanged price target of $1.06. She notes that Genting Singapore G13 is poised to move into Japan with several upcoming urban and regional integrated resorts in the country up for bidding, and thereby securing growth prospects for the medium term. She expects any new Japan IRs to open in FY2026 at the earliest and, depending on the size and location, to generate earnings before interest, taxes, depreciation and amortisation of between US$270 million ($365.5 million) and US$1 billion. Genting Singapore closed on June 27 at 92.5 cents, up 1.65%.
Week ahead
This coming week, economic data scheduled to be released will include US purchasing managers’ index and US employment figures. Property watchers in Singapore will be looking out for URA’s private home prices data on the same day. On July 3, Singapore purchasing managers’ index numbers will be out, as will US initial jobless claims.
