Brief respite in US-China trade war; Fed rate cut not likely in upcoming FOMC meeting

US President Donald Trump says he will delay increasing tariffs on US$250 billion ($344 billion) worth of Chinese goods from the initially intended date of Oct 1 to Oct 15, “as a gesture of goodwill”. Taking to Twitter on Sept 11, Trump said the postponement was done “at the request of the Vice-Premier of China, Liu He, and due to the fact that the People’s Republic of China will be celebrating their 70th Anniversary on Oct 1”.

The planned tariff hikes were for non-consumer items such as inputs for the production of goods. The Trump administration increased the levy for these items from 25% to 30% — a move that was highly opposed by US businesses as well as farmers, who have borne the brunt of China cutting off purchases of American soybeans, corn and other crops.

The current respite from the US follows China’s tariff exemptions for 16 types of US products, including anti-cancer drugs and lubricants as well as ingredients such as whey and fish meal used in animal feed, the Chinese Finance Ministry posted on its website on Sept 11. This comes after Chi

nese President Xi Jinping’s comments in May to start a waiver programme as the cost of the protracted trade war with the US slowed its economy.

Some analysts view China’s move as a friendly gesture. However, ING Bank’s Greater China economist Iris Pang says “it is probably more a means of supporting the economy”, and contrasts the listed exclusions with the 5,000-plus types of US products that are already subject to China’s additional tariffs. She adds that “there are still many uncertainties in the coming trade talks [and] an exemption list of just 16 items will not change China’s stance”.

Even so, the stock market has responded well to the moves, with Wall Street stocks breaking out of a two-day slumber on Sept 11. The Dow Jones Industrial Average jumped 227.61 points, or 0.85%, to end the day at 27,137.04. The Standard and Poor’s 500 Index increased 21.54 points, or 0.72%, to close at 3,000.93, while the Nasdaq Composite Index surged 85.53 points, or 1.06%, to 8.169.68.

Amid this flurry, earlier last week, China removed limits on foreign institutions that want to invest in its stock and bond markets as it seeks to attract more investments from abroad. The State Administration of Foreign Exchange has removed the overall ceiling of US$300 billion on total asset purchases, offering unfettered access to China’s capital market. It has also removed the cap on its renminbidenominated offshore market, allowing overseas institutions to invest in Chinese securities using offshore renminbi.

Active stocks

Singapore Exchange- listed Keppel DC REIT will be included on the FTSE EPRA/ NAREIT global development index from later this month. The index is developed by FTSE Group, in collaboration with the European Public Real Estate Group (EPRA) and the National Association of Real Estate Investment Trusts (NAREIT). It is viewed as the leading benchmark for REITs, and is designed to track the performance of listed real estate companies and REITs worldwide.

Chua Hsien Yang, CEO of Keppel DC REIT, says, the achievement shows the company’s “commitment in growing the REIT to be recognised among real estate equities worldwide. This will enhance Keppel DC REIT’s visibility to index funds and support liquidity and capital-raising efforts.” Keppel DC REIT closed on Sept 12 at $1.76, down 1.68% for the day.

Yangzijiang Shipbuilding Holdings continues to be an actively traded stock. Executive chairman Ren Yuanlin is assisting in the investigation of a former party official in China, and the company’s share price has been weighed down as a result. Since the news broke last month, the company has been trying to support the share price with share buybacks and the announcements of new contracts, including two signed on Aug 23 and Sept 4, bringing total new orders to five in the third quarter. On Sept 11, it was the third most heavily traded counter for the day, closing at $1.11, up 4.72%.

The week ahead

Enterprise Singapore, the trade agency under the Trade and Industry Ministry, will release Singapore’s non-oil domestic exports figure for August later this week. The US Federal Reserve Open Markets Committee will be meeting on Sept 17 and 18 amid expectations of a rate cut. Fed chairman Jerome Powell has alluded, however, that it is not likely to cut interest rates for the second time this year. Despite Trump’s continued pressure on this matter, Powell says the central bank is committed to keeping the country’s economic expansion going and “would act as appropriate to sustain [that]”. E