(Aug 21): Singapore’s slowing economic growth has started to hurt company earnings as a trade war intensifies between its two biggest trading partners.

By one measure, companies in the benchmark Straits Times Index posted their first profit decline in six quarters in the three months ended June, according to data compiled by Bloomberg. Meanwhile, 23 of the 30 stocks in the gauge saw cuts in earnings estimates after reporting quarterly results, according to Credit Suisse Group AG.

Earlier this month, the trade-dependent nation lowered its economic growth forecast for this year to almost zero on escalating US-China tensions. Analysts expect profits to deteriorate throughout 2019 as a result.

“Most companies disappointed in their results,” Credit Suisse analysts Gerald Wong and Kwee Hong Ching wrote in a note. And “slowing economic growth is likely to drive deeper earnings cuts.”

Constituents of the index posted a 0.1% year-on-year decline in diluted earnings per share from continuing operations in the three months ended June, data compiled by Bloomberg show. That’s the first such drop since the quarter ended December 2017.

The benchmark stock gauge has fallen about 5% this month, getting closer to erasing its gain for 2019. Just last month, investors were sanguine about Singapore’s equity market given the positive outlook for dividends and diversified operations. Singapore’s primary index is still up 2.2% in 2019, compared with a 5.2% decline in Malaysia’s benchmark gauge and a 1.6% advance in Indonesia’s Jakarta Composite Index.

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Singapore “stands in the crossfire” of the trade war, Johan Jooste, managing director of Purple Asset Management, said by email. “The government may have to add stimulus by way of fiscal or monetary policy and hope for the best.”

While the weakening growth outlook is seen as damaging the bull case for stocks, not everyone is pessimistic. The country’s shares have become “enticing prospects for value hunters,” said Nirgunan Tiruchelvam, head of consumer equity at Tellimer Research.

The Straits Times Index trades at 12.1 times estimated 12-month forward earnings, below its five-year average of 13.1 times.

But on Tuesday, DBS Bank market strategist Kee Yan Yeo reduced his year-end target for the index to 3,380 from 3,450. The measure closed the day at 3,138.16. “We see the risk of earnings cuts” this year “if the US-China trade war drags further,” he said.

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