Taylor Swift is one of the biggest stars on earth today, but her presence could not help her boyfriend Travis Kelce’s team Kansas City Chiefs win the biggest sporting event in the US. Against expectations, including US President Donald Trump’s, the Chiefs were beaten 40-22 by the Philadelphia Eagles at last weekend’s Super Bowl.
Surprises came aplenty at other sporting events, such as the English Premier League. My team since childhood, Manchester United, which is suffering from a poor run, achieved an unlikely FA Cup 5th round on an injury time goal scored by much-maligned Harry Maguire in its win over Leicester. A bigger shocker, however, was Liverpool’s exit by Plymouth Argyle — a non-Premier League side at the bottom of its lower division.
Since Jan 20, American Democrats have mostly been silenced into submission. Trump has unleashed shock and awe with a series of executive orders, trampling on everything from inspector-generals to USAID and DEI [diversity, equity, and inclusion] policies; his “bro” Elon Musk and his crew were allowed to burrow into Treasury data in a bid to ferret out fraud and waste, while finding the time to pick fights with OpenAI’s Sam Altman with a hostile bid of US$97.4 billion ($132.1 billion).
The “resistance” to Trump’s first presidency now seems almost futile with the trifecta Republican control of both the Senate and the House, plus a 6-3 dominance of the Supreme Court. Controversial presidential appointments have been confirmed with party line votes in the Congress. There is little legislative appetite to challenge Trump’s executive orders and actions by Congressional Republicans when threatened in a primary sponsored by the President if they do not fall in line.
The few judges who have dared stand in the way by challenging some of the orders, or by blocking Musk team’s access to sensitive federal data, have been threatened with “repercussions for people”. Vice-President JD Vance called these injunctions illegal — declaring on Musk’s X [formerly Twitter] that “judges aren’t allowed to control the executives legitimate power”.
Indeed, despite Trump’s prediction, the Chiefs’ loss may have been an upset. But another surprise that is also starting to unravel is that of Wall Street bulls compelled to re-evaluate their belief that “Trump is good for markets”, or “Trump’s tariff bark is bigger than its bite”.
Both the S&P500 and the Nasdaq are still up in the year-to-date, but just like Bitcoin which is back below US$100,000, they have given back January’s highs. After two years of over 20% return on equity indices, one can expect the still-bullish US stock analysts to insert more “caveats” in their projections in the coming months.
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Tit and Tat
Whilst Canada and Mexico have had a 30-day stay of execution on 25% tariffs till March, the US has gone ahead to slap taxes on all steel and aluminium imports. This move will directly hit Canada first, followed by Americans who will see all manner of infrastructure and home building costs go up.
As we had suggested, stocks of exporters will be constantly at risk of asymmetric tariff shocks in the Trump paradigm. And it is not a surprise that stock prices of major exporters to the US, such as Korean steel companies and carmakers, fell first. Japan’s Prime Minister Shigeru Ishiba thought he had a good visit and meeting with Trump. Nippon Steel, whose bid for US Steel was thwarted, has also committed to investing heavily in the US instead. That has not stopped Nippon Steel from trading down as well.
As countries hit by Trump rolled out reciprocal taxes on US goods, Trump, speaking from his Mar-a-Lago resort, promised tit-for-tat: “If they charge us, we charge them.” International exporters, including US-listed companies like Nvidia Corp, have no choice but to brace themselves for turbulence and uncertainty. As several economic studies have shown, tariffs of up to 25% imposed in Trump’s first term and carried over by Biden have done little to reduce the US trade deficit which has risen to US$920 billion last year.
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Furthermore, despite those tariffs, scant manufacturing jobs in the US have been created, nor additional foreign direct investments into the US. For the MAGA world, the belief will be because they have not gone far enough. It is not unreasonable to expect the central plank of Trump keeping his promises will continue to impact trade and global companies — many of whom are American and US-listed making up key components of the S&P 500 and Nasdaq 100 companies.
In the meantime, China’s initial response to Trump’s opening 10% tariff kicked in after Chinese New Year. As China’s first salvo targeted only US$20 billion of goods vs the impact on US$450 billion slapped on them by the Americans, this response has been described as “temperate”. It was, however, surgical. According to the Brookings Institution — the industries singled out — lorries, agriculture, machinery and energy exports — support between 400,000 to 700,000 American jobs in the Midwest Rust Belt. In other words, the MAGA heartlands. The price of eggs in America is not going down but some of Trump’s supporters’ jobs might.
More interestingly, China’s response — dubbed Xi Jinping’s “assassin’s mace” — includes export controls on rare metals, restrictions on two American companies operating in China and an anti-trust investigation into Google. Prices of rare metals gallium, germanium and antimony, which are needed to make advanced chips, weapons and munitions, jumped by up to 400% after the bans. Potentially, tungsten used for armour piercing bullets and molybdenum powder used for missiles will be next.
As The Economist postulates: “Western reliance on Chinese made inputs for its own industries goes far beyond rare minerals and is greater than meets the eye.” If the Americans were to add imports from third countries containing Chinese inputs, the dependence is estimated by IMD Business School to be four times greater than bilateral trade statistics. Perhaps Trump knows this and that’s why Greenland and Canada have become more “strategic” — although one can be assured the Gaza Riviera idea is more based on his real estate mogul instincts, even if most neutrals are horrified by the idea of displacing Palestinians, even if temporary.
As America controls financial infrastructure, former US president Joe Biden could previously lock Russia and other Russia-friendly countries out of SWIFT, the international inter-banks payments system. By the same token, China could in future lock up Western supply chains through its BRI or BRIC [Brazil, Russia, India, and China] network especially as American allies, strong-armed into submission by threats and tariffs, start questioning their allegiances.
The market’s verdict on the tariff moves since Chinese New Year may be telling. Both the broader indices and the tech ETFs are up; Japan too has gained, with the yen rising against US pullbacks. It could just be relative valuation from where Asian markets, especially China’s, were versus Wall Street. Our buying-the-dip view for China and Japan broad indices works. If only we had added shorting the rally for the US indices too.
Surprising Singapore
We were chuffed to hear that US Secretary of Defense Pete Hegseth had an introductory call with Ng Eng Hen, Singapore’s Minister for Defence. Newly-appointed Hegseth may not have been able to name an Asean country during his confirmation hearings, but it was reassuring to hear Hegseth conveying appreciation for Singapore’s support, and of the “reaffirmed the importance of working together to ensure a secure and prosperous Indo-Pacific”. Meanwhile, Marco Rubio, the US Secretary of State, has chosen to boycott the upcoming G20 summit in South Africa. With any luck, we might be graced by Hegseth’s presence when the Shangri-La Dialogue is held in May.
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On Feb 10, the outgoing CEO of DBS Group Holdings, Piyush Gupta, reported his final full-year record result, plus extra dividends for shareholders and bonus for junior employees. The subsequent gain by DBS shares helped spur our Straits Times Index (STI) to break out above Jan 8’s 3,886-point-high and etch an intra-day high above the 3,906-point intra-day all-time high seen in 2007. This strong showing follows the 10% pop to $14 by Singapore Exchange Group on Feb 8 — marking a gain of nearly a third since news last October that the Capital Markets Committee has been formed. Doubting Thomases who missed the rally and were convinced that our market would perpetually remain in the doldrums can only kick themselves.
Indeed, Singapore was the surprising market last year that no one believed in. Last year, it delivered a total return of 23.5%, and looks on course to continue this year. Its current momentum is supported by the three banks which now contribute 54% weight of the STI — up from 40% in 2019, backstopped by a more hesitant Jerome Powell’s Fed in cutting rates, thanks to mercurial Trumpian policies which is perceived currently as inflationary to the American consumer.
It is not just the banks and financials. Various other names covered in this column have done their part in value creation and growing earnings via corporate transformations. They include index bellwethers such as Singapore Telecommunications , Hongkong Land Holdings , SATS, Singapore Technologies Engineering , Seatrium and Yangzijiang Shipbuilding — all of which have led to 30-50% re-ratings in the last year.
Ironically even though consensus amongst most brokers and banks that cover the STI are for a year-end target of 4,200 points, or under 10% gain, DBS itself is more sanguine. Its STI forecast of 3,950 points warns about sideways moves following a 6.3% increase since the US election with uncertainty created by the tariff wars, and was also circumspect on the upcoming Feb 18 Singapore budget as well as latest General Election developments impact on stocks.
We may yet surprise ourselves this year as “boring” becomes more fashionable. I find myself parking myself into some STI laggards including Thai Beverage , Genting Singapore and Wilmar International with the hope to ride the carry if the index breaks new ground, or mitigate any downside if it catches any global trade flu. As I position safety first before heading out to Africa for the next two weeks, I too take small comfort in the search for alpha down the curve, with little dips into undervalued stock plays in the small caps rerating up.
These last few weeks apart from privatisation “jackpots” offers for SLB Holdings, Japfa and Paragon REIT from controlling shareholders for those seeking value, we have seen Tuan Sing and Yangzijiang Financial Holdings ratchet up by 15% whilst still well within their NTA [net tangible assets]. Likewise, Nam Cheong extended its double-up last year by a 10%-plus pre-results pop, and LHN continued to build on over 50% gains. This stage of the Singapore market could yield better returns outside of the main index plays. Our own Super Bowl of overlooked small and mid-caps may yet yield more surprises than upsets in this uncertain world out there.
Chew Sutat retired from Singapore Exchange after 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
