SINGAPORE - United States President Donald Trump’s announcement of a 90-day pause on additional tariffs for most countries has sent the bears in the stock markets retreating, but the conditions for a sustained rebound may not be in place yet, analysts warn.
Most countries, including Singapore, now face a 10 per cent tariff on their exports to the US, effective April 5.
China, which retaliated against what it called threats and blackmail from Washington, is subject to a fresh 145 per cent tariff this year.
In retaliation, the world’s second-largest economy imposed a 125 per cent tariff on American goods entering China effective from April 12. The tit-for-tat tariff war between the two superpowers could still harm global trade and economic growth, analysts said.
“When the dust settles, we’ll be in a much higher tariff world than we were when Trump walked into office,” said Mr Stephen Olson, a visiting senior fellow at the ISEAS - Yusof Ishak Institute in Singapore. This will be damaging for everyone, but more so for the small, trade-dependent countries of South-east Asia, which will find themselves most vulnerable, he said.
The 90-day reprieve from worst-case so-called reciprocal tariffs on “any country, except for China” is by no means a back-to-square-one moment.
Ms Eunice Tan, head of Asia-Pacific credit research at S&P Global Ratings, said strained US-China relations will affect Asia-Pacific economies, given the region’s integrated trade ties with both countries. “A sharper deterioration in China-US relations will further strain confidence, and severely disrupt supply chains and global trade flows,” she said, warning of other negative multiplier effects on households and businesses.
Analysts noted that sector-specific tariffs, such as those on pharmaceuticals and semiconductors, remain in place, and ongoing negotiations for potential trade agreements have yielded no deals so far.
Instead, the Trump administration found itself having to exclude electronics such as smartphones and laptops from the reciprocal tariffs, which means they will not be subject to the 145 per cent tariffs levied on China. But hours later, it said they are included in the semiconductor tariffs, which face a separate round of import tax.
Even if Mr Trump’s tariffs are permanently rolled back, the economic damage has already been inflicted, said Mr Nigel Green, chief executive officer of global financial advisory deVere Group. “A deep, lasting shock to confidence is now embedded in the global system, and investors are beginning to demand larger discounts to buy risk assets - whether bonds, equities, or beyond,” he said.
The issue isn’t just about the tariffs but is about the erratic decision-making, violent swings and sudden reversals that leave businesses, households and financial markets in perpetual uncertainty, he said.
Valuations are becoming more cautious. Companies that once traded at premium multiples now face harder questions. Bonds previously deemed ironclad no longer carry the same certainty. Safe-haven assumptions are being re-examined.
Valuations need to adjust further before equities can translate into the “hope” phase of the next cycle - the powerful recovery stage marking a transition into a new bull market, said Mr Peter Oppenheimer, chief global equity strategist at Goldman Sachs Research.
He said the recent downturn in stock markets could easily become a cyclical bear market, given the growing recession risk in the US.
Four key indicators are necessary to confirm a sustained rebound in stock markets: compelling stock valuations; widespread pessimism that prompts a repositioning of portfolios; strong policy support and signs of an improving growth rate, Mr Oppenheimer said.
Goldman Sachs’ chief Asia-Pacific strategist Timothy Moe has an “overweight” recommendation on Singapore, which is deemed more stable than its Asean peers. He has a “positive view” on heavyweight banks here.
DBS Group, which has seen its share price tumble from above $46 a share towards $37 in a matter of days during the Trump on-off tariff onslaught, is now trading around $40. OCBC Bank, which fell from above $16 towards $14 during the same period, is now in the $15 range. UOB, which tumbled from above $36 to around $31 in the same period, is now trading around $34.
Morgan Stanley suggested investors avoid knee-jerk reactions. They should consider adding spare cash to short-term fixed income and increasing allocations to real assets such as gold for a potential inflation hedge.
Ms Low Soo Fang, vice-president of Asia ex-Japan equities at UOB Asset Management, recommended that investors take a defensive stance as they navigate the tariff uncertainties.
Investors may want to consider trimming heavy trade-exposed companies that are more prone to tariffs and tilting their portfolios towards quality growth, high dividend and interest rate-sensitive stocks, to limit market volatility, she said. These defensive stocks include companies in the defence, telco, utilities and real estate investment trust (Reit) sectors.
Mr Vasu Menon, managing director of investment strategy at OCBC, expects markets to be volatile in the run-up to early July when the 90-day pause on reciprocal tariffs comes to an end.
“But intermittent corrections can offer opportunities for those with the risk appetite and patience, as we are constructive on the investment outlook over a 12-month horizon,” he said.
He recommended a strategy of pacing fresh investments into markets through a dollar-cost averaging strategy in the current volatile market environment. “Staying purely in cash is not a good strategy as markets could see significant gains if tariff fears ease significantly and the tide turns,” he said.
He has an overweight position on equities. While China is one of the top picks, its exposure should be carefully managed within a diversified portfolio, he said.
Selective opportunities are also seen in US equities and other markets in Asia ex-Japan like Singapore, where valuations are inexpensive and dividends are attractive. In the fixed income space, Mr Menon prefers investment-grade bonds with short and intermediate maturities that are less vulnerable to interest rate volatility. “Investors should remember that volatility is a two-sided coin representing not only risk but also opportunities.”
Mr Hou Wey Fook, chief investment officer at DBS Bank, reinforced the importance of a resilient portfolio amid Mr Trump’s policy flip-flops. He has turned “constructive” on Europe’s industrial sector, given Germany’s decision to end fiscal conservatism and unleash a strong stimulus.
DBS is also keeping its constructive view on China on the back of Chinese artificial intelligence company DeepSeek’s technological breakthrough, and the mainland’s steep valuation discount to the US.
DBS remains overweight on US technology and on gold as a reliable hedge during uncertain times.
Hedge fund strategies help as a risk diversifier, but manager selection is crucial, Mr Hou warned as hedging is a zero-sum game where one’s loss is another’s gain.
Private asset strategies are recognised for their potential to generate alpha returns that outperform benchmarks.
Despite the revival of growth fears amid policy uncertainties, Mr Hou believes that the equity up-cycle stays intact. He reckoned the likelihood of a US recession remains moderate at 25 per cent, supporting DBS’ base-case scenario of a soft landing as it expects the negative economic effects of tariffs will be counterbalanced by tax cuts and deregulation.
However, investors should not be complacent.
He said while the benefits of Mr Trump’s policies, such as deregulation and improved efficiency, are expected to take longer to filter into the economy, negative effects from his tariffs and federal workforce cuts are felt instantly.
The past couple of weeks have been a roller-coaster ride for investors around the world as Mr Trump inflicted sweeping tariffs on foes and allies alike, only to pause them a few days later. More than US$10 trillion (S$13 trillion) was wiped off global stock markets a day after Mr Trump’s “Liberation Day” tariffs announcement on April 2.
The tariffs also sparked a crisis of confidence in the US dollar, prompting the selling of dollar assets including US Treasury securities as the world’s opinion of the American economy and its rule of law was severely tested.
A week later, stocks jumped after Mr Trump suspended the new reciprocal tariffs, except for those imposed on China.
[Collection]straitstimes.com