03 July 2019
Markets welcomed the weekend news from the G20 in Osaka that the US and China will restart trade talks that had broken off six weeks earlier. US President Donald Trump met with his Chinese counterpart President Xi Jinping and said there would be no further escalation of US tariffs for now. Trump also signaled an easing of some US restrictions on Chinese technology giant Huawei.
What investors can expect
- “The dialogue between President Xi and President Trump has taken matters back to the status quo prevailing at the end of April. We now expect to see prolonged negotiations until the US general election in November. This was an expected outcome of these talks and thus its impact is neutral for investors. Meanwhile, corporates will continue to remain cautious with little visibility on the long-term direction for trade and economy. In this environment, monetary policy easing may not be effective to turn around domestic growth. I remain defensively positioned as I expect the slowdown in China’s economic growth momentum to become more apparent in the third quarter.”
- Jing Ning, Portfolio Manager
- “In the medium-term, US-China disagreements that arise are likely to lead to market volatility. I would note that whether there is a full resolution or not, the trade tensions will impact corporate behaviour and global supply chains. Chinese technology companies will invest more in Research & Development (R&D) especially in chips and key components and reassess their supply chains with preference to more local suppliers. Chinese policy makers may use this opportunity to accelerate reform of state-owned enterprises (SOEs) amid external pressure. I remain focused on looking for companies that could benefit from these trends.”
- Raymond Ma, Portfolio Manager
- “The apparent softening of the US stance towards Huawei can only be positive. The markets are on tenterhooks owing to the continuous change of trade policies by the administration and it would be good to get this behind us sooner than later. The immediate concern for the equity markets is the slowdown of global Gross Domestic Product (GDP) and business climate led by moderating Purchasing Managers’ Index (PMIs) everywhere, and the subsequent effect on earnings. All policies that reduce uncertainty and create positive momentum are welcome.”
- Aditya Khowala, Portfolio Manager
- “The restart of US-China trade negotiations with the postponed implementation of additional tariffs will allow more time for both sides. Meanwhile, we expect the Federal Reserve’s dovish stance and People’s Bank of China’s easing bias on monetary policy are likely to continue for the rest of 2019.”
- Bryan Collins, Head of Asian Fixed Income
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