Date: March 10, 2025
- ST Engineering helped STI cross 3,900, up 19 points at 3,914.48
- Wall St’s indices dropped 2.6-3.5% after Trump announced tariffs
- US stagflation talk is now making the rounds
- No US rate cut expected this month
- Analysts maintain “buy’’ recommendations on Yangzijiang Shipbuilding
- SGX expanded HK depository receipts to eight
ST Engineering helped STI cross 3,900, up 19 points at 3,914.48
The Straits Times Index posted a mixed performance last week in the face of sharp drops on Wall Street because of uncertainty created by the incumbent administration’s tariffs on imports from Canada, Mexico and China. However, the index still managed to record a gain of 19 points or about 0.4% for the week at 3,914.48.
ST Engineering was the standout index performer, rising S$0.72 or 13.3% to S$6.13 over the five days. The defence and engineering group reported a net profit of S$365.7 million on Feb 27 for the second half ended Dec 31, a 19.6% increase from S$305.9 million in the previous corresponding period.
Maybank upgraded the stock to “buy” on Feb 28, on the back of “continued growth, better margins and nascent turnaround in the satcom (satellite communications) business”.
Maybank and CGS International raised the stock’s target price to S$5.70 and S$5.60, respectively. Phillip Securities Research raised the target price to S$6.10.
Wall St’s indices dropped 2.6-3.5% after Trump announced tariffs
President Donald Trump’s 25% tariffs on imports from Canada and Mexico went into effect last week while duties on Chinese goods have been doubled to 20%. Trade war concerns have already hit business and consumer confidence, and a key US GDP forecast signalled that the economy is shrinking at a faster pace than previously thought.
In response, China said it will impose additional 10%-15% tariffs on certain US imports this week and expanded export controls on US companies. Canada is responding with immediate 25% tariffs on U.S. imports worth more than US$20b and will expand the duties to imports worth over US$86b if Trump’s tariffs remain for 21 days. Mexico is also expected to retaliate, with an announcement likely this week.
The announcement caused US stocks to plunge sharply on Monday and Tuesday. They rebounded on Wednesday after the White House provided automakers a one-month exemption from tariffs on imports from Canada and Mexico but dropped again on Thursday before stabilising on Friday.
For the week, all three major US indices weakened – the Dow Jones Industrial Average lost 2.6%, the S&P 500 fell 3.1% and the Nasdaq Composite lost 3.5%.
Markets have now given up all the gains sparked by Trump’s election victory in November last year.
In terms of economic data, tariff impacts showed up significantly in January’s trade numbers. A huge spike in imports ahead of tariff implementation resulted in the trade deficit hitting a record.
US Stagflation talk is now making the rounds
A rising number of observers are discussing the possibility of stagflation hitting the US economy – stagnant growth and rising inflation.
“A stagflation trend was already in place before tariffs,” Adam Phillips, managing director of investments with EP Wealth Advisors was quoted as saying in US newspaper Barron’s, alluding to some recent signs of softer economic growth and continued inflation. “To the extent that tariffs remain in place, that will only exacerbate the problem.”
Barron’s also quoted Phoebe Venable, president and chief executive at financial advisory firm CapWealth as saying investors can expect volatility as long as the White House’s moves on trade remain unpredictable.
“In the near term, everybody’s just going to have to expect, and not be surprised, by the volatility that we’re seeing,” says Venable. “Because just like you and I don’t know exactly how this is going to play out, the market certainly doesn’t know how it’s going to play out either.”
“The three components of stagflation are low growth, rising unemployment and higher inflation, and it seems like we might be kind of tipping up on this, depending on how labour is impacted,” she said.
“We’ve yet to see the results of all of the DOGE (Department of Government Efficiency) layoffs really come to bear in the numbers but I would say everybody could just kind of keep an eye on that and keep an ear open for when we all start talking about stagflation.”
Torsten Sløk, of Apollo Global Management, also mentioned stagflation in his note on Wednesday.
“From a Fed perspective, the biggest problem is that tariffs increase prices and hence inflation,” Sløk wrote. “That is why a trade war, by definition, is a stagflation shock: Higher prices and lower sales. If tariffs on Canada and Mexico continue for several months, then the Fed will focus on the rising unemployment rate and start cutting rates soon.”
No US rate cut expected this month
The spectre of rising inflation has meant that the futures market is not expected any action by the US Federal Reserve at its 19 March policy meeting – as of Friday, the probability of there being no rate cut stood at 97%.
Analysts maintained “buy’’ recommendations on Yangzijiang Shipbuilding
Following the selling of Yangzijiang Shipbuilding’s shares in the final week of February that led to an S$0.84 or 26% crash to S$2.38, several analysts were quoted by The Business Times as saying the slide was unwarranted and overdone whilst maintaining their “buy’’ recommendations.
DBS Group Research reiterated its “buy” call on the counter with a target price of S$3.80. UOB Kay Hian (UOBKH) maintained its “buy” call but trimmed its target price slightly to S$3.50 from S$3.60 previously. CGS International maintained its “add” rating with its target price unchanged at S$3.62.
The selling emerged after the US Trade Representative’s (USTR) announcement on Feb 21 that proposed heavy fees for Chinese-made ships entering US ports.
DBS Group Research analyst Ho Pei Hwa called the sell-off “unwarranted” and said it was a “buying opportunity”. “(The) recent massive sell-off on Trump’s port fees proposal is uncalled for compared to (the) steady performance of shipping and other shipyard stocks,” she said.
Similarly, UOBKH analyst Adrian Loh was “unconcerned” about the USTR’s proposed fees’ impact on Yangzijiang, calling the counter’s price drops and sell-offs “overdone”.
The proposed port fees, which amount to US$100 per container, can be “easily passed on”, said Loh on Friday. The vessel maker has not received order cancellations and deferrals as its clients take a “wait-and-see approach”, according to management, he added.
Over the week, Yangzijiang’s shares rose S$0.01 to S$2.39.
SGX expanded HK depository receipts to eight
The Singapore Exchange (SGX) last week launched its second batch of Hong Kong Singapore Depository Receipts (SDRs) in partnership with Phillip Securities, bringing the total number of HK counters listed here to eight.
The new offerings are Xiaomi and Meituan in artificial intelligence and electric vehicles respectively, as well as Ping An Insurance in financials, targeting “yield-seeking investors”.
SDRs are unsponsored depository receipts that provide holders with a beneficial interest in an underlying security. Each SDR can be converted into the underlying security through an issuance and cancellation process on a one-to-one basis.
Last October, SGX introduced SDRs on five Hong Kong mega-cap listcos: Alibaba, Tencent, BYD, HSBC and Bank of China.
Investing with Insight: Watch this Week’s Technical Outlook
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