SINGAPORE (July 2): Stocks slumped in another week of selling as uncertainties generated by the escalating trade conflict between the US and China (and the rest of the world) dented investor confidence. 

Aside from the threat to slap additional tariffs on an expanded list of goods, there was also conflicting news from the White House with respect to further restrictions on foreign investments in US technology companies.

Investors are already scrambling to discern which companies will be hit if and when previously announced tariffs come into effect (tariffs for the first batch of goods is slated to come into effect on July 6), and to what extent. 

The task is extremely difficult given the complicated, and often opaque, global supply chain. And then there are other non-tariff retaliatory options, which would be hard to pinpoint and even harder to quantify.

The only consensus, it seems, is that a full-blown trade war will be a lose-lose for all. As a result, many investors feel compelled to adopt a more risk-off approach, at least pending greater clarity. 

Not surprisingly, the usual suspects, emerging markets — often perceived to be riskier and more reliant on global trade activities — and their currencies suffered the brunt of the selling.

Total value for my Global Portfolio fell 4.1%, reflecting this broader global market selloff. Even the big tech stocks, which have been comparatively resilient thus far, succumbed to profit-taking. The MSCI World Index dropped by 1.9% in the past week. 

Last week’s losses pared cumulative portfolio returns to 2.3% since inception. Nevertheless, this Global Portfolio continues to outperform the benchmark index, which is down 0.2% over the same period. 

Positively, the latest addition to the Global Portfolio, Sunpower Group, bucked the broader market decline. The stock gained another 4.2% over the last week. Valuations are still attractive relative to the company’s expected growth over the next few years.

I disposed of all my 445 shares in Walt Disney Co. Its share price was starting to recover in early June, and even after Comcast made a US$65 billion ($88.8 billion) competing bid for Twenty-First Century Fox, valuing the latter at US$35 per share. 

Disney’s all-stock offer for the same assets — valued at US$52.4 billion — had previously been accepted by Fox’s board of directors and was slated to go to shareholders for approval in early July. 

In response to the Comcast bid, Disney has upped its own offer to roughly US$71.3 billion (or US$38 per share) — this time, through a combination of cash and stock. The Fox board has accepted this offer as superior to the one made by Comcast. 

There is no question that Disney will be able to extract significant synergies and value from the Fox assets. The latter’s huge back catalogue of TV series and movie library will boost content for Disney’s direct-to-customer service, slated to launch in late 2019. 

Disney will also be best positioned to integrate and monetise Fox’s franchises (such as Avatar, Deadpool and certain X-Men characters) across its platforms — studio, resorts and theme parks as well as merchandising. 

My concern is that Fox’s shares are now trading near US$49, or about 28% above Disney’s latest offer. That suggests investors are expecting the bidding war to go higher. Indeed, there are reports that Comcast is sounding out financing options for a higher bid.

At present, most expect Disney to have the upper hand, especially after it gained antitrust approval from the US Justice Department for the acquisition. 

Nevertheless, the fact that the company will be forced to pay a much higher price must be detrimental to shareholders. 

On the other hand, failure to acquire Fox will be a setback to its streaming ambitions. The Fox acquisition also comes with stakes in European pay-TV, Sky and Star India as well as US-centric streaming service provider, Hulu. There are other media assets that can be ­acquired, but none seen to be as extensive and valuable as Fox’s. 

The Disney-Fox-Comcast tussle is unlikely to be the last. The industry is expected to see more mergers going forward as traditional media, telecommunications and cable service providers scramble to size up as quickly as possible for the battle against technology disruptors like Netflix and Amazon.com. Case in point, fresh from its successful US$85.4 billion acquisition of Time Warner, AT&T launched its second and more competitively priced streaming service. 


Tong Kooi Ong is chairman of The Edge Media Group, which owns The Edge Singapore 

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