There is now a belated attempt to re-recruit and train new controllers. The only saving grace is the decline in tourist arrivals, not just from Canada and Europe but also increasingly from the rest of the world. Air cargo volume has dropped, too, as tariff uncertainty kicks in. For instance, DHL Express has suspended consumer shipments to the US worth more than US$800 ($1,037), while its parent company, Deutsche Post, cut 8,000 jobs.
The UK was the first to reach a trade deal with the US on May 9, cheering markets but still hurting consumers and businesses compared to the world before April 2. A 90-day tariff reduction between the US and China was reached on May 12 and markets found another spring in their steps.
Nonetheless, given how speculative money was seen to have helped the bounce in the US markets, and how an economic slowdown, stubborn inflationary pressures and thinning shelves drive home the reality, it may be opportune to follow the old adage of “sell in May” and go away.
Beware the silver linings
Last month’s survey of global fund managers by the Bank of America was illuminating. Institutional funds, bothered by tariff and global growth concerns, are the most bearish in 25 years. A global recession is the top tail risk, outstripping inflation and geopolitics. About 73% of the respondents believe the era of US exceptionalism has peaked, with net allocation to US equities falling by 53%, its largest two-month drop on record and another record for US President Donald Trump.
See also: US and China: A titanic clash of resolve and future trends
Institutions were shifting towards cash, defensive sectors and bonds, except US Treasuries. On the other hand, they were lightening up on equities, cyclicals and small caps. US indices have largely recovered, with only the Magnificent Seven currently down more than 20%. Gold had become the most crowded trade, overtaking US tech stocks for the first time in two years.
Trump’s favourite words, “tariffs” and “retaliatory measures”, were considered significant economic headwinds. Girls in the US were told by Trump to own just two or three dolls instead of asking for 30, while the spectre of Chinese manufacturers dumping their cheap goods kept manufacturers sleepless in other markets. For optimists, the risks of a tariff war may have lifted, given that some normalised trade may continue even if Trump’s tariffs on China still look obscene.
Unfortunately, the temporary settlement between the US and China on May 12, resetting 145% to 30% for 90 days, looks precarious, even though the war might have taken a step back from the brink of a global trade Armageddon. Whether this was because Trump blinked or part of his grand strategy, it is premature to expect it to be business as usual for stock markets and companies.
See also: 100 days of populism
Investors in April were overweight commodities, cash and utilities, and underweight US stocks, emerging market equities and cyclicals, while hoping for three rate cuts by the US Federal Reserve Board. A hoped-for soft landing for the economy has diminished, even as Trump blamed former President Joe Biden for the stock market and the economy.
With the big shift to defensiveness in April sparked by earnings concerns, macro volatility, a shaky dollar and policy risk, the ingredients for a bear rally were set. That is our observation after the first two weeks of May. With low expectations, a bear raid by hedge funds and a short covering rally would inevitably follow as markets delude themselves with news that companies’ earnings reports and policy moves were not as bad as feared. Do not mistake hope for economic reality.
Big in Japan
I am relieved by the election results in Singapore. It was a win for Singapore with broad support for the continuity of government in this changed world. With my civic duty done on May 3, I made yet another visit to Japan and attempted to validate my January 2023 dark horse call of Japanese equities.
In the last two years, the Nikkei rose from 26,000 points to top 40,000 three times. Two to three times as volatile as the Straits Times Index, it is no wonder that tariff shudders took the Nikkei down to 31,000 rapidly in April, before rallying back to 38,000 or so as it tracks the US markets.
What is more interesting, which has been part of our thesis for continuing to stay long in Japan, and reiterating our call for some passive allocation via the Lion-Nomura Japan Active ETF, is the yen’s performance. As the index tumbled, the yen rose. It strengthened from 158 in December to 140 in April, offsetting more than half of the equity market decline. While it has eased a little to 146 again in the recent rebound, the 20% equity gain more than offsets the drop.
I wish I had stayed faithful to our January call to buy Japan on dips. The dip occurred while I was incommunicado in the Empty Quarter in Oman in early April. However, the Japan ETF had since rebounded from a tempting mid-95 cents to an auspicious $1.08. The artificial intelligence component in its selection methodology could have helped provide it with a steadier return than the more volatile Nikkei index. So too could the strengthening behaviour of the yen in times of distress.
In our trips to Japan in the last three years, we have enjoyed cheaper shopping and dining thanks to a weaker yen than the Singapore dollar. We will return in November, but I will hold on to any excess yen in cash. With Japanese funds bringing capital back from the US instead of setting up manufacturing in the US, as Trump hoped, the yen will stay strong versus the US dollar and perhaps outperform the Singapore dollar in any market meltdown.
Sink your teeth into in-depth insights from our contributors, and dive into financial and economic trends
More importantly, there appears to be increased domestic confidence in its equity markets and the real economy. Asset prices, too, have been well supported by international institutions, still at or underweight. Japan is benefiting from some wage and consumer price inflation, with domestic expenditure continuing to expand slowly in Japanese fashion, but in the right direction.
More importantly, as the US, its great security ally, demands more on trade and other matters, the Japanese are opening up more to China and Europe. Much like how my bird and plant identification apps in Hakuba picked up spring flowers from European origin and Eurasian species of birds, there is much to gain from positive cross-pollination as evidenced in nature, and so there is to trade.
If Japanese tourists versus US arrivals are a proxy, I remain happy to buy Japanese exchange-traded funds (ETFs) on dips, perhaps after the next sell on news: when a damp trade deal with the US is finally announced.
Staying put in Singapore
By this same layman proxy on markets, visitor arrivals in Singapore in 2024 reached 16.5 million last year, up 21% from 2023. There was hope for 2025 to surpass this and the pre-pandemic levels of 2019. Without Taylor Swift in the first quarter last year and other events, arrivals in March saw a slight dip, but overall 1Q numbers were still slightly up y-o-y.
The Straits Times Index (STI) also took its April dive after briefly touching 4,000 points in March. That selloff took 15% off the index to 3,400. Climbing a wall of worry rather quickly, it had come back closer to 3,900 points. A law professor friend made his first Singapore ETF investment below 3,500 and did what most seasoned traders find hardest to do when in the money. He doubled up around 3,750.
Having weathered our three local banks’ results last week, which generally dipped, but were in line or above expectations, the STI looks to hold and build from here, having shown signs of decoupling from US market gyrations. At least what is clear is that local Singapore rates continue to drop, with the 10-year 200 basis points lower and T-bills dropping to 2.3%, showing ample liquidity needed for a home. All this is happening while the Singdollar makes new highs against the US dollar, indicating ample interest in Singapore dollar assets.
Several of our favourites, including index stocks Singapore Telecommunicationsand Singapore Technologies Engineering, have broken out. Not only have they stayed resilient in the April selloff, but they have even edged higher. REITs continue to see-saw with logistics and China REITs being the current laggards due for a rally, as investors fear the changed world of Trump tariffs and the uncertainty it brings.
Nonetheless, “Mayday” in Singapore could turn out to be a May ball. For patient investors who have been buying based on value and discounts to net asset value, the privatisation or M&A “jackpots” continue.
Shareholders have accepted Japfaand Paragon REIT’s offers, while Sinarmas Landhas had to raise its “not fair” offer from 31 cents to 37.5 cents. Thus far this year, there have been at least 11 or more recent offers, including Ban Leong Technologiesand Amara Holdingsrecently, with SLB Development, Econ Healthcare and Pocurri Corp. As interest rates continue to ease and the cycle turns for property, more action in real estate, hospitality and REITs may be on the cards as smart money may show up to close the valuation gaps in real assets, including, most recently, Frasers Propertyoffering 71 cents in its second attempt on May 14 to privatise Frasers Hospitality Trust.
Chew Sutat retired from the Singapore Exchangeafter 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange. He was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore
