Bulls And Bears

Singapore shares slump on concern over trade war

More volatility expected amid fears of global retaliation against US tariffs

Singapore shares, along with their regional peers, started the week lower yesterday as US President Donald Trump drags the world into a showdown over trade.

Mr Trump, who decided to slap tariffs of 25 per cent on steel and 10 per cent on aluminium, fuelled nervousness as he continued to ride roughshod over America's trading partners over the weekend. He has vowed to slap tariffs on cars made by European automakers, many of which have huge manufacturing operations in the United States.

"The downturn in Asian markets came as no surprise as the impact on manufacturing was felt," said CMC Markets sales trader Oriano Lizza. "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 (STI) closed at 3,438.61, down 40.59 points or 1.2 per cent. More than 2.3 billion shares worth $1.6 billion were traded. There were 137 gainers to 351 losers.

DBS Bank has pegged its year-end objective for STI at 3,715, from 3,688 previously.

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

What is clear is that more volatility is in store. Experts at AXA Investment Managers said Mr Trump's latest threat suggests that he "is picking a fight with not just China, but also the rest of the world. This risks a global retaliatory backlash".

"With nearly half of the sales of S&P listed companies coming from overseas, it is not surprising the market has reacted with concern," they added.

But they do not think the tariffs will affect China much. Last year, steel and aluminium accounted for only about 3 per cent of total exports, and within which the US represented only 6 per cent.

OCBC Bank economist Tommy Xie said: "The risk of retaliation cannot be ruled out. Markets should watch more closely whether China will launch investigations on imports of US soya bean, one of the top US products to China."

In Singapore, Creative Technology bucked the trend to end at $8.75, up a staggering $3.62 or 70.6 per cent.

It has risen 617 per cent since Feb 22, when a Business Times article said its founder Sim Wong Hoo believed he had found the holy grail of headphone audio with his Super X-Fi headphone holography.

A version of this article appeared in the print edition of The Straits Times on March 06, 2018, with the headline 'S'pore shares slump on concern over trade war'. Print Edition | Subscribe