Singapore stock market rises in cautious Asia relief rally after US-China tariff reprieve

Straits Times

13-05-2025

In Singapore, the Straits Times Index (STI) jumped 1.89 per cent, or 73 points, to 3,949.29 when the market opened. ST PHOTO: LIM YAOHUI
SINGAPORE - Stock markets in Asia on May 13 rose in a cautious relief rally on hopes a 90-day tariff truce will lead to the end of an all-out trade war between the United States and China.
In Singapore, the Straits Times Index (STI) jumped 1.89 per cent, or 73 points, to 3,949.29 when the market opened. It pared two-thirds of its gains and was up 0.6 per cent, or 22 points, at 3,897.84 as at 10.44am.
Most Asian markets joined with Japan's Nikkei Index index rising 1.7 per cent, South Korea's Kospi advancing 0.4 per cent and Australia's ASX200 up 0.7 per cent.
The Hang Seng Index, which has jumped the previous day, fell 1.3 per cent, while the Shanghai Composite Index edged up 0.2 per cent.
Overnight on Wall Street, the blue-chip Dow Jones Industrial Average rallied 1,160 points or 2.8 per cent, while the broader S&P 500 surged 3.3 per cent and the tech-heavy Nasdaq 100 Index soared 4.35 per cent back into a bull market.
The US dollar meanwhile jumped over 1 per cent for its best one-day move since Nov 6, in the immediate aftermath of Donald Trump's victory in the US presidential election.
Under the surprise deal, which will last for 90 days, US exports to China will see tariffs reduced to 10 per cent from 125 per cent. Meanwhile, tariffs on Chinese exports to the US will be lowered t o 30 per cent from 145 per cent.
Morningstar Equity Research analysts Kai Wang and Kathy Chan said the tariff reductions were greater than expected, and should benefit certain sectors.
'We do think a recovery should be imminent based on the progress made. Certain sectors should see higher appreciation during the market upswing, with the technology, communication services, and consumer cyclical sectors benefiting the most during the recovery period,' they said.
However, they also cautioned that although the worst may be over, 'the road to full recovery may still be bumpy, as US President Donald Trump has a history of changing course and making maximalist proposals,' they added.
JP Morgan Asset Management chief market strategist for the Asia Pacific Tai Hui said the immediate market reaction has been positive, noting that Hong Kong stock indices and US equities futures both rose.
'Overall, we expect the market to get back on to a risk-on sentiment in the near term. Pressure on the Fed to cut rates may also ease for the time being,' he said.
OCBC bank chief economist Selena Ling added that the deal 'buys some time' where the tariffs are brought back from 'sky-high levels to more manageable levels', leading to market relief.
'However the caveat is that it is not a permanent agreement. As such, there are still inherent uncertainties,' she said.
She also pointed out that there are no specific purchasing commitments unlike in the 2020 trade deal that Mr Trump signed with Beijing that required China to increase purchases of US exports by US$200 billion (S$261 billion) over two years.
'There is a permanent dialogue channel but no dispute resolution panel; and the sectoral tariffs (for semiconductors and pharmaceuticals, for instance) are still pending,' Ms Ling added.
'So it is a positive start to de-escalation but still a long road ahead for negotiations,' she said.
Bank of Singapore chief investment strategist Eli Lee added that the US-China trade de-escalation is deeper and faster than widely expected, and will serve as a positive near-term catalyst for risk assets, especially for sectors and companies most exposed to the US-China tariff war.
He noted that after the announcement, the US 10-year Treasury yield moved higher, US equities rallied, and the US dollar strengthened, in-line with what analysts expected to see with firmer US growth expectations.
'Our base case remains that the US Federal Reserve will take a wait-and-see approach and cut rates only once in 2025,' he said.
He also said this bodes well for what can be expected from US trade talks with other countries.
Sue-Ann Tan is a business correspondent at The Straits Times covering capital markets and sustainable finance.
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