Singapore’s manufacturing stocks were rallying on Monday, as some analysts expressed optimism that the upcoming meeting between Chinese President Xi Jinping and U.S. President Trump may yield, if not a cease fire in the U.S. trade war, then at least a dial-back of tensions.
Among sector plays, STI-component Venture jumped 4.96 percent by 11:17 A.M. SGT, Valuetronics tacked on 3.91 percent by 11:07 A.M. SGT, and Hi-P surged 11.11 percent by 11:17 A.M. SGT.
Xi and Trump are set to meet at the G-20 meeting in Buenos Aires later this week, and optimism that at least a face-saving, if unsubstantive, agreement would emerge was running high among analysts. That was in part due to a South China Morning Post article last week, citing a source with knowledge of the matter, that hardline White House adviser Peter Navarro wasn’t on the guest list, a development which suggested cooler heads might prevail.
Derek Hold, head of capital markets economics at Scotiabank, said in a note on Friday that the economic damage inflicted by the U.S. tariffs and China’s retaliation may be pushing the two toward reconciliation.
“I think China is too astute not to find an out, and the U.S. concern should be pivoting more toward lost opportunity by its firms in what is still the fastest growing major economy in the world with enormous longer-run potential,” Holt said.
“China can create the optics of easing access and respecting IP rights while still adhering to their Made in China 2025 goals and still doing what they wish in a mixed market/command economy,” he added. “It shouldn’t be worth dying on a hill by making no optical concessions to the Trump administration after which China will do what China thinks it must anyway.”
A Singapore trader told Shenton Wire that he believed there was short-covering in the sector ahead of the G-20 meeting. He also noted that the key beneficiaries of a positive outcome to the talks would be the tech sector as that’s where much of the intellectual property issues have emerged.
In Singapore, Hi-P in particular has been badly dented by having most of its facilities located in China and as its customers have told the company they were delaying orders amid trade-war uncertainty. Hi-P has nine manufacturing facilities, with six in China.
Venture has also previously said its customers have been concerned about the trade war, although most of its production by site area was in Malaysia, not China.
In a note on Monday, CGS-CIMB pointed to a non-deal roadshow it hosted for Venture on Friday, in which Venture said it expected to benefit from the ongoing U.S.-China trade tensions. But Venture added that global manufacturing supply chains will take time to change from the mainland, the CGS-CIMB note said.
This article was originally published on Monday 26 November 2018 at 11:42 A.M. SGT; it has since been updated.