Markets Insights

US-China trade spat will remain on investors' radar

S'pore to release data for first-quarter GDP as well as April inflation and industrial output

Developments surrounding the US-China trade relationship will continue to drive sentiment in regional and local markets this week.

The relationship between the world's two largest economies has been tense, with tit-for-tat tariff measures back to the fore.

Also, President Donald Trump has issued an executive order barring US firms from using Huawei telecommunications equipment. And the US Commerce Department added Huawei to a trade blacklist, just days after saying that Mr Trump was optimistic over a deal.

Last Friday, Beijing suggested that the resumption of talks with the US would have a meaningful conclusion only if Washington changed course.

While the risk of retaliation by Beijing against US companies operating in China has increased, observers still expect a deal to be hammered out in the second half of this year or next year.

UOB economist Barnabas Gan said a worsening of the fallout from the trade war is likely to hurt Singapore's external-oriented industries, especially in key manufacturing sectors such as electronics and precision engineering, as well as financial and business services.

The Singapore market has a shorter trading week: Vesak Day was yesterday, making today a public holiday. Thai and Malaysian markets are also closed today.

As the local earnings season draws to a close, attention this week will shift to data releases.

Tomorrow, the first quarter's gross domestic product (GDP) data will be released. UOB economist Alvin Liew expects year-on-year growth to remain unchanged from the preliminary estimate of 1.3 per cent reported on April 12.

But on a quarter-on-quarter basis, growth could increase to 2.3 per cent on a seasonally adjusted annual rate from the preliminary figure given in April, he said.

Meanwhile, last month's inflation and industrial production numbers will be released on Thursday and Friday, respectively.

FXTM market analyst Han Tan said the trio of economic indicators to be released over the week "will be closely scrutinised as the domestic economy copes with external downside risks from weakening global momentum".

He said: "With the Singapore dollar having erased its year-to-date gains against the greenback, further signs of a softening domestic economy may add to tailwinds for USD/SGD, with this likelihood increased following the Chinese yuan falling to new 2019 lows against the greenback last week."

Even though China's economic docket is empty, key economic data releases are expected across the region. Tomorrow, Thailand will release its first-quarter GDP data. Analysts polled by Bloomberg expect economic growth to ease to 2.9 per cent year-on-year from 3.7 per cent in the prior quarter.

South Korea will also release trade data tomorrow, with Japan doing the same on Wednesday.

A version of this article appeared in the print edition of The Straits Times on May 20, 2019, with the headline 'US-China trade spat will remain on investors' radar'. Subscribe