SINGAPORE (Sept 30): US President Donald Trump said on Sept 25 that a deal to end a 15-month trade war with China could happen sooner than people thought and that the Chinese were making big agricultural purchases from the US, including of beef and pork.

Trump told reporters in New York there was a good chance of reaching a trade deal with China. His optimistic words came just a day after he blasted China on its trade practices at the United Nations General Assembly, saying that he would not accept a “bad deal” in the US-China trade negotiations. This had triggered an angry response from Beijing’s foreign ministry.

Trump’s positivity was not taken as an indicator by some pundits, especially since hopes were dashed in June when a deal that US Treasury Secretary Steven Mnuchin had said was “90% of the way there” suddenly fell through.

In any case, US markets have risen in response to Trump’s latest statement, and Asian markets gained the following day, Sept 26, as well. The Standard and Poor’s 500 Index increased 0.62% on gains in technology and consumer shares, while the Nasdaq was up 1.05%. The Dow Jones Industrial Average saw a hike of 0.61%, while the local Straits Times Index inched up 0.05%.

“Global trade tensions continue to be the primary driver over market sentiment, with risk appetite seizing any opportunity to push higher,” says Han Tan, market analyst at FXTM. “Considering the fact that a rapid deterioration in US-China relations is not without precedence, investors will continue scouring the horizon for any signals that can push risk sentiment either way.”

Oil prices experienced a double whammy overnight — faster-than-expected recovery in Saudi Arabian oil production and a rise in official US crude inventories. OANDA senior market analyst for Asia-Pacific Jeffrey Hally notes that overall, the drops were moderate, as oil traders probably held off selling more aggressively because of Trump’s trade remarks.

The same could be said for gold prices, as a short-term FOMO (fear of missing out) fast-money trading saw a reversal out of gold and into equities, resulting in a fall of nearly US$29, or 1.90%, to US$1503.60 per oz. Hally says this shows the “lightness of short-term positioning in gold, as well as the street’s vulnerability to headlines on a quiet data week”.

In the field of currencies, only the dollar staged a comeback, rising 0.7% to 98.97, with the gains most noticeable against developed market currencies. In comparison, the euro fell 0.7% to 1.095, while the sterling fell 1.15% to 1.236 as the British Parliament reconvened following the Supreme Court’s overturn of the government’s decision to suspend the House of Commons.

Despite the positive outlook, some market watchers choose to tread with caution, as eventual disappointment after a build-up in market optimism would cause global indices to tank.

UK Prime Minister Boris Johnson said on Sept 25 that he would not seek an extension for Brexit even if the conditions of a recently passed bill were met, which would force him to do so. He had previously said the government would respect the law and leave on Oct 31.

On the local front, analysts’ fears of a technical recession could soon be realised as Singapore’s factory output saw its fourth consecutive decline in August. Data released by the Economic Development Board reported that the drop of 8% last month was significantly sharper than the 0.1% dip in July. This was due largely to the electronics sector. And, excluding output from the biomedical sector, manufacturing fell 12.4%.

Active stocks

Yangzijiang Shipbuilding Holdings continues to be an actively traded stock, closing flat at 98 cents on Sept 26. As executive chairman Ren Yuanlin continues to be involved in investigations, the company’s share price has remained actively traded. The company is now managed by Ren’s son, Letian, as investors await further clarity and updates on when and if Ren will be back.

Golden Agri Resources is one company set to benefit from the Indonesian government’s announcement that it will not be collecting palm oil levies for the rest of the year. Indonesia’s chief economic minister Darmin Nasution said his government would re-impose the levy on Jan 1, 2020, if prices rose over US$570/tonne, as the country would begin to use the B30 biodiesel blending mandate. On Sept 26, Golden Agri was the third most-heavily traded counter for the day, closing at 23 cents, down 2.13%.

Catalist-listed Trendlines Group on Sept 24 announced that it was slated to receive US$22 million for its new Singapore-based venture fund, Trendlines Agrifood. The investments were made by parties including Temasek Holdings and Librae Holdings — an entity related to property tycoon-cum-entrepreneur Vincent Tchenguiz and another Southeast Asian investor. The conditional commitment amount includes the investment of $10.9 million from Librae in July. Trendlines closed flat at 8.8 cents on Sept 26.

On Sept 24, Singapore Exchange Regulation urged investors to exercise caution in the trading of Mirach Energy shares. The announcement came after the regulator noted that the company’s share price had more than doubled — from 13 cents on Feb 8 to 29 cents on Sept 3. Further investigations revealed that a small group of individuals who were connected to each other were responsible for over 69% of the buy volume of the company’s shares. Mirach is currently on the SGX Watch-List under both the Financial Entry Criteria and the MTP Entry Criteria. It closed on Sept 26 at 12 cents, down 16.43%.

The week ahead

Singapore is slated to release its Manufacturing Purchasing Managers’ Index, which measures the activity level of purchasing managers in the manufacturing sector. Other macroeconomic data releases include the US trade balance and unemployment data on Oct 4.