BullsAndBears

Asian markets discount fears of trade war

Bargain hunters out in force, believing that Sino-US conflict unlikely to escalate

Investing in the stock market seems as risky as playing Russian roulette these days.

The trade conflict between the United States and China has kept market conditions fraught, with no indication where the next hit is coming from.

Incredibly, while US stock futures floundered on Wednesday and at the start of trading in New York overnight, the Dow Jones Industrial Average closed 230.94 points up at 24,264.30 - a whopping 700-plus point rally from its session low.

Not surprisingly, markets in Asia rose yesterday as investors chose to believe that the US-China trade conflict is unlikely to escalate further.

"Emboldened investors went on a bargain-hunting spree, encouraged that neither country has established a tariff implementation itinerary, so hope remains alive with both parties still at the bargaining table," said Mr Stephen Innes, head of trading (Asia-Pacific) at Oanda.

"President (Donald) Trump continues to walk back the most bombastic elements of his rhetoric. He has softened his Nafta stance. It happened with Amazon, and it could very well occur with China."

Japan's Nikkei 225 advanced 1.53 per cent while Hong Kong, China and Taiwan markets were closed for the Qing Ming Festival. The Straits Times Index rallied 65.95 points or 2 per cent to 3,405.65, with 330 gainers to 105 losers.

AEM Holdings got a boost following news that it had received $192 million of sales orders for delivery this year as at April 1, $77 million more than its Feb 1 update. The precision manufacturer added 51 cents or 9.53 per cent to $5.86 in light volume of 2.7 million shares.

Cosco Shipping International rallied 8.3 per cent to 45.5 cents with 31 million shares traded. Some analysts are keeping their "buy" call on the counter as the fundamental long-term story remains intact.

With markets clearly more volatile now, Mr James Cheo, senior investment strategist at the Bank of Singapore, said "investors should be nimble to adjust positions should the situation deteriorate".

"From a portfolio context, we maintain our overweight in cash so as to tide through this period."

He said markets in North Asia - China, Japan, South Korea and Taiwan - as well as India could be more impacted by the trade dispute due to their higher exposure to the US on a revenue-weighted basis.

Companies in the electronics and telecommunications, automotive and apparel sectors could bear the brunt.

A version of this article appeared in the print edition of The Straits Times on April 06, 2018, with the headline 'Asian markets discount fears of trade war'. Print Edition | Subscribe