Bulls And Bears

Markets up on hope of US-China trade truce

STI, regional bourses rally as Washington talks up trade deal ahead of G-20 meet

Local and regional shares enjoyed a rebound yesterday on speculation that the US and China have a tentative truce ahead of this weekend's Group of 20 (G-20) summit.

The renewed optimism sent the Straits Times Index up 27.35 points, or 0.8 per cent, to 3,328.60.

Markets in Australia, China, Hong Kong, Japan and South Korea all closed comfortably higher, but Malaysia bucked the trend.

Investors had much to digest between the end of Asian trading on Wednesday and yesterday's opening bell.

US Treasury Secretary Steven Mnuchin suggested that a trade deal was 90 per cent done; then President Donald Trump admitted that reaching an agreement tomorrow was possible even though he was prepared to extend tariffs on remaining Chinese imports if the two sides were not able to see eye to eye.

Vanguard Markets managing partner Stephen Innes noted that the 10 per cent needed to push the deal through "has always been the gap too far to bridge - especially that trust gap where the US wants to keep existing tariffs in place to ensure China's compliance".

FXTM research analyst Lukman Otunuga said: "Given President Trump's unpredictability, it would be unwise to be unprepared for a possible scenario where talks descend into disagreements on trade. Such an outcome will most likely rattle financial markets."

Volume here clocked in at 1.37 billion shares worth $1.24 billion, with gainers trumping decliners 239 to 151. Banks were among the main gainers. DBS added 1.4 per cent to $25.83, OCBC was 1.5 per cent higher at $11.42, and UOB added 1.8 per cent to $26.13.

The risk-friendly mood of the day, as well as news that Nasdaq-listed chipmaker Micron Technology posted a stronger-than-expected earnings guidance for its third quarter, saw technology stocks outperform the benchmark index.

Venture Corporation climbed 1.8 per cent to $16.31, Hi-P International gained 5.2 per cent to $1.41 and AEM Holdings finished 4 per cent up at $1.04.

The cyclically sensitive manufacturing and semiconductor sectors have been facing headwinds from slowdowns and the ongoing US-China trade conflict.

Expectations of a friendly interest rate environment have seen real estate investment trusts rally, reaching "expensive" valuations. DBS Equity Research analysts believe unit prices have room to climb, but "the next leg-up should be more modest and gradual".

A version of this article appeared in the print edition of The Straits Times on June 28, 2019, with the headline 'Markets up on hope of US-China trade truce'. Print Edition | Subscribe