US tariff uncertainty continued to worry investors

Date: April 14, 2025

• US tariff uncertainty continued to hit local stocks, STI down 8.2%
• US paused tariffs for 90 days, according to Trump because people were getting “yippy’’, all three US stock indices rebounded
• Pause not extended to China, tariffs raised to 145%
• China responded with 125% tariff on the US, vowed to “fight to the end’’
• US bonds were sold off, gold prices surge to US$3,200 per ounce
• Banks take a hit, analysts downgraded the sector
• Index blue chips stepped up their buybacks
• Retail investors were net buyers in early April: SGX Research

 

Tariffs continued to be the focus and worry

The local stock market, along with all other global stocks, continued to be rocked by US tariff uncertainty last week.

It enjoyed a brief respite on Thursday after US President Donald Trump on Wednesday granted a 90-day pause on his tariffs – one day after the White House spokesman said there would be no pause – but eventually came under pressure on Friday. In all, the index shed 313 points or 8.2% to finish the week at 3,512.53.

On Wednesday 9 April the index closed at 3,393.69, the lowest for the year to date and just over a week after it crossed 4,000 for the first time in history on 28 March.

Average daily volume traded was S$3.1b versus S$2b for the week before.

Trump paused tariffs because people were getting “yippy’’

Trump just paused some tariffs on most of the world for 90 days after he noticed people were “getting yippy,” he explained on Wednesday.

“I thought that people were jumping a little bit out of line,” Trump said at an event outside the White House. “They were getting yippy. They were getting a little bit yippy. They were getting a little bit afraid.”

The Dow Jones Industrial Average gained 5% for the week, the S&P 500 rose 5.7% and the Nasdaq Composite Index’s rise was 7.3%.

The pause does not include China where tariffs were raised to 145%

The Trump administration increased the tariff on Chinese goods to 104% on Tuesday then 125%. The White House clarified on Thursday that the total tariff against Chinese goods is actually at 145%, given the 20% supposedly fentanyl-related tariff imposed earlier this year.

Jason Furman, an economics professor at Harvard who chaired Barack Obama’s Council of Economic Advisers explained on X that the escalating trade war with China will basically cancel out any pricing relief consumers may experience as a result of the 90-day pause.

“That is probably more inflationary than the original liberation day tariffs — with the extra 71% on China outweighing the reduced reciprocal tariffs on the 70 countries,” Furman wrote of the 125% tariff, which has since increased to 145%.

There was good news on the inflation front – but for how long?

The short end of the yield curve pulled back after the consumer price index for March came in at 2.4%, below expectations for a 2.6% annual uptick.

“Today’s cooler-than-expected inflation should be taken as old news, with tariffs expected to send inflation rocketing higher in the next couple of months,” writes Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.

“The Fed remains in a tough spot, caught between a trade war causing tight financial conditions and weight on the economy as inflation takes off’’.

China responded that it will “fight to the end’’; currencies now a worry

China responded to the White House’s latest tariffs move against the world’s second-largest country, lifting its rates on U.S. goods to 125% and vowing to “resolutely counterattack and fight to the end.”

China’s finance ministry suggested the country wouldn’t keep escalating tariffs as the current 125% levy means “no market acceptance for U.S. goods exported to China.”

The ministry added: “Even if the U.S. continues to impose higher tariffs, it will no longer make economic sense and will become a joke in the history of world economy…If the U.S. continues to play the tariff numbers game, China will ignore it. However, if the U.S. insists on continuing to substantially infringe on China’s interests, China will resolutely counterattack and fight to the end.”

The remarks open up the possibility of retaliation beyond tariff rates. Concerns are growing that currencies may become a bigger part of the U.S.-China trade war, potentially creating major ripples. The US dollar has been sinking, with the dollar index down 4% since Trump’s April 2 so-called reciprocal tariff announcement.

US bonds were sold off, gold prices surge to US$3,200 per ounce

The selloff in US markets extended to Treasuries, with the yield on the benchmark 10-year Treasury rising almost one-half percentage point this past week to 4.49% in often chaotic trading that former Treasury Secretary Larry Summers likened to an occurrence in an emerging market country. The 30-year Treasury came close to 5% on Friday before pulling back to a 4.9% yield.

Gold surged 7% in the past week to over US$3,200 an ounce, bringing its year-to-date gain to 23%. Meanwhile the dollar’s weakness could make it tougher for the Federal Reserve to cut short-term interest rates this year because that action would diminish the greenback’s appeal.

Banks take a hit, analysts downgraded the sector

Maybank said it expects credit demand to slow as businesses assess the trade war fallout and demand destruction from the US’s tariffs.

“While Singapore banks would likely benefit the most from supply chain relocations to SE Asia given their integrated cross-border models, the addressable market may shrink. The tit-for-tat 116% effective tariffs on China could weigh on the sector’s North Asia exposure’’ said Maybank.

It noted that the selloff had brought the sector to 1.2x price/book, which is its long-term mean. “We downgrade DBS and UOB to HOLD. Maintain OCBC as HOLD. Reduce sector outlook to NEUTRAL’’ said Maybank.

UOB-Kay Hian downgraded DBS to “sell’’ cutting its target from S$49.80 to S$40 and maintained a “hold’’ on OCBC while reducing the target price from S$21.10 to S$16.85.

The broker cut its net profit forecasts for DBS and OCBC by 13%, citing lower loan growth and higher credit costs due to non-performing loans in the manufacturing sector, particularly within Asean.

DBS Group Research downgraded UOB from “buy’’ to “hold’’ whilst cutting the target price from S$38.50 to S$32.70 while OCBC’s “hold’’ was maintained albeit with a reduction in target price from S$17.60 to S$14.40.

Over the week, DBS fell S$5.17 or 11.9% to S$38.13, UOB lost S$2.99 or 8.4% at S$32.47 and OCBC shed S$1.61 or S$9.7% to end the week at S$15.01.

Index blue chips stepped up their buybacks

DBS bought back and cancelled one million shares for S$39.1 million at the price range of S$36.31 to S$40.32 per share on Monday, and then 500,000 shares for S$19.1 million at a range of S$37.86 to S$38.53 on Tuesday. On Wednesday, it spent a total of S$26.1 million to repurchase and cancel 700,000 of its shares at a price range of S$36.88 to S$37.86.

UOB on Monday repurchased 100,000 shares for S$3.3 million, between S$29.68 and S$34.21 each, cancelling 50,000 of them and holding the remaining half in treasury. On Tuesday, it picked up a second tranche of 100,000 shares for S$3.2 million at a range of S$32.01 to S$33.67, cancelling half the shares and holding the rest in treasury. On Wednesday, it bought back a third tranche of 100,000 of its shares for S$3.1 million at a price range of S$30.71 to S$31.38, cancelling half and storing the rest in treasury.

SGX said it spent S$1.8 million buying back 150,000 shares at S$11.86 to S$12.15 each on Monday, and another S$1.8 million repurchasing a second tranche of 150,000 shares at S$11.84 to S$12.05 per share on Tuesday. All its repurchased shares were stored in treasury. On Wednesday, it scooped up 150,000 shares for around S$1.8 million at a price range from S$12.08 to S$12.15, storing all the repurchased shares in treasury.

ST Engineering on Monday paid between S$6.16 and S$6.36 per share, or a total of S$3.1 million, to repurchase 500,000 shares. The defence and engineering group is one of the biggest blue-chip gainers year to date with a gain of more than 40 per cent.

Others that were active on the buyback scene included Venture Corp, CapitaLand Investment and City Developments.

Retail investors were net buyers in early April: SGX Research

Retail investors net bought S$1.24 billion of Singapore stocks over the first eight trading sessions of April, said SGX Research in an 11 April market update, adding that during these sessions a surge in global volatility saw the STI generate a 9.6% decline in total return, returning to 3Q24 levels whilst the iEdge S-REIT Index also declined 7.4% in total return.

“STI Banks led the net retail inflow over the eight sessions and averaged 12.3% declines in total return. Outside the STI, iFAST Corporation, Keppel DC REIT, UMS Integration, Singapore Post and Suntec REIT booked the most net retail inflow’’ said SGX Research.

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