Monday, May 20, 2019

Trade War Thoughts

As I am writing this, the US market is slightly red and treasury yields are edging down, signifying some flight to safety assets. The drama ensues where the US decided to ban Huawei from doing business with them, which I think will be further detrimental to the unfolding of the trade war. This is extremely likely to further deteriorate bilateral relations between US and China.

Honestly, I think the trade war is indeed room for worry in the short term, but I take comfort in the fact that Trump will not be in office forever (even if he gets re-elected) and someone who is less protectionist and friendlier towards China may eventually emerge in office (maybe an exit strategy then).

Therefore, I see this as a platform to enter battered stocks with good fundamentals. One of which I identified is Suntec Reit, and its current price stands at 1.81 which is still respectfully below its NAV of 2.09.Another stock which looks battered and hovering near its 52-week low (9.14) is SIA and also below its NAV of 10.36.

A quick glance at its recent financial presentation reveals a drop in operating profit mainly attributed to rising fuel prices. But since fuel prices are hedged to some extent in their presentation, the main point we should be looking at is if the volume of travelers will continue to increase and if the trade war will affect the company.

I also picked up a very insightful article here which I felt that some points here were very relevant. The basic premise here is that a trade war will cause incomes to drop which might lead to decreased air travel. Air cargo flows will also be reduced as the demand of air cargo drops due to increased costs.

These two stocks are worth considering in my opinion, but please let me know if you have any insights and/or comments. Another person's perspective is always very welcome.

Happy Vesak Day!

1 comment:

  1. When a trade war comes with support at the state level, not only large holdings, but also individuals suffer. Did you notice the Bitcoin course? A couple of official statements were enough for this. Fortunately, I use only small online services for exchange - This allows me to quickly operate my cryptocurrency stocks making small transactions.


Accumulating Suntec Reit

 Thought this was interesting to see the counterparties for now- entered again at price 1.46, my second tranche. We shall see again.. Cheers!