S’pore shares reel on fears of trade war

Most regional markets also took a hit and analysts say more volatility is expected

Singapore shares, along with its regional peers, kicked off the week lower as US President Donald Trump drags the world into a showdown over trade, while Italy seems headed for a hung parliament.

Italy faces a prolonged period of political instability after voters delivered a hung parliament on Sunday, spurning traditional parties and flocking to anti-establishment and far-right groups in record numbers.

Mr Trump, who has decided to slap a 25 per cent tariff on imported steel and 10 per cent on aluminium, fuelled nervousness as he continued his rampage on America's trading partners over the weekend. He vowed to slap tariffs on cars made by European carmakers, many of which have huge manufacturing operations in the US.

"The downturn in Asian markets came as no surprise as the impact on the manufacturing sector was felt," said Mr Oriano Lizza, sales trader at CMC Markets.

"The STI felt the knock-on effect from the downturn in local markets... The main concern stems from investor sentiment as markets digest the potential short-to-medium-term impact of the tariffs."

After opening at 3,490.06, the benchmark Straits Times Index closed at 3,438.61, down 40.59 points, or 1.2 per cent.

More than 2.3 billion shares, worth S$1.6 billion, were traded. There were 137 gainers to 351 losers. DBS has pegged its year-end objective for STI at 3,715, from 3,688 previously.

Elsewhere in the region, except for Shanghai and Shenzhen in China, markets from Australia to Japan and South Korea continued to reel on fears of retaliations.

What is clear is more volatility is in store. Experts at AXA Investment Managers (AXA IM) say the latest threat of greater and broader tariffs suggests Mr Trump is getting serious about trade protectionism.

"Trump, in other words, is picking a fight with not just China, but the rest of the world. This risks a global retaliatory backlash and significantly elevates the impact of protectionism. With nearly half of the sales of S&P-listed companies coming from overseas, it's not surprising that the market has reacted with concern," AXA IM's economists said.

But they do not think the tariff will affect China much.

"China used to export a lot of steel and aluminium, but as domestic production was cut and external tariffs increased, the amount of exports has dwindled in recent years.

"In 2017, steel and aluminium only accounted for about 3 per cent of total exports, and within which, the US represented only 6 per cent.

"Hence, the direct impact of these tariffs should be limited for China's overall economy."

Mr Tommy Xie, an economist at OCBC Bank, believes China will "recompense injury with kindness with further openness of its domestic market as a soft approach to the latest trade tension".

"The risk of retaliation cannot be ruled out. Markets should watch more closely on whether China will launch investigations on imports of US soya beans, which is one of the top US products to China," he added.

In Singapore, Creative Technology bucked the trend to end at S$8.75, up a staggering S$3.62, or 70.57 per cent. Creative has risen a whopping 617 per cent since Feb 22, the day The Business Times published the article that Creative founder Sim Wong Hoo believed he has found the holy grail of headphone audio with his Super X-Fi headphone holography.

Sembcorp Marine lost ground, ending at S$1.90, down 12 Singapore cents, or 6 per cent, as investors remained concerned about its fundamentals, such as its ability to capture new orders and its capital expenditure spending.

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