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Trade and political risk overshadow the market

The US-China trade war risk escalating into a financial war if the White House seriously considers curbing US financial investment to China and delisting Chinese companies from US stock exchanges.

There are currently 156 Chinese firms, mainly technology companies like Alibaba and Baidu listed on US boards. Their total market capitalisation amount to over US$ 1.2 trillion.

The possibility of implementing this idea however, remains low at the moment as the negative impact to US capital markets is likely to far outweigh the benefits that the White House could possibly get on the trade front. It will undermine US markets as a fair, open, non-discriminatory place for global companies to seek listings.

Not surprisingly, the US Treasury and Nasdaq Exchange both vowed against the idea of delisting Chinese companies.

Nonetheless, the offshore yuan, CNH weakened to 7.133 against the dollar on concerns of a re-escalation of US-China trade tensions. Some pessimistic views on the currency is resurfacing, citing weaker economic outlook and trade uncertainties. Immediate resistance level of USD/CNH remains at 7.200 mark.

US-listed Chinese technology firms plunged on Friday, including Alibaba (-5.09%), JD.Com (-5.95%), NetEase (-4.63%) and Baidu (3.67%).

China’s official manufacturing PMI reading came in at 49.8 this morning, beating forecasts of 49.5 in a Reuter’s poll. However, this still marks a fifth consecutive month of contraction in China, which is considered the world’s manufacturing hub. USD/CNH had little movement after the release of the PMI data, suggesting that continuous weakness in the manufacturing sector will unlikely change policymakers’ minds to keep a neutral policy stance.

As Hong Kong (HK) protests carries on, tourism groups arriving in HK for the National Day holiday week is forecast to plunge 86% from a year ago. This will put more pressure on HK’s hospitality, retail and entertainment and service sectors, even weighing on Singapore-listed companies namely HK Land, Jardine Strategic and Jardine Matheson.  

As crude oil prices extend their second week of consolidation, offshore & marine sectors in Singapore were among the worst performers in the benchmark index. Risk-off sentiment as a result of trade uncertainties led to broad selloff in the Singapore market on Monday, sending down its benchmark index STI to approach a key support level at 3,100 points.


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