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The Star
a day ago
- Business
- The Star
City-state's appeal as a safe haven rises
SINGAPORE: Singapore's safe-haven appeal is rising as investors seek respite from the volatility unleashed by US President Donald Trump's tariff flip-flops and potential tax cuts. Singapore equities have delivered a total return of 13% since the start of this year – more than double the MSCI All Country World Index's 6% gain. The gains come as investors move funds into safer and more stable stocks here, noted Morgan Stanley analysts on May 22. One of the causes of market volatility is the so-called 'Taco' trade, a term coined by Financial Times columnist Robert Armstrong referring to 'Trump always chickens out' when it comes to imposing tariffs. Each time Trump backs down, stocks stage a rally. The first notable Taco trade came on April 9, when Trump paused the supersized tariffs he had proposed on April 2 after global stock markets plunged and longer-term US Treasury yields spiked. Soon after, Trump hinted at possibly removing Jerome Powell as chairman of the US Federal Reserve, only to retreat once markets reacted sharply. Other examples include an agreement to roll back US tariffs of 145% to 30% on most goods imported from China, and a similar pullback by China on US goods. The United States and China announced on May 12, after talks in Geneva, that there would be a further 90 days to negotiate and agree on tariffs. On cue, markets recovered. The latest Taco trade was on May 26 and 27, when markets rallied after Trump announced a delay to 50% tariffs on goods from Europe. US stocks remained strong on May 29, after a ruling by the US Court of International Trade stated that Trump had overstepped his authority by imposing across-the-board duties on imports from other nations. But Wall Street is increasingly brushing off tariff threats from Trump: A recent analysis quoted by Bloomberg said the S&P 500 Index's sensitivity to tariff-related headlines has dropped sharply since April. Data showed that just over a third of the S&P 500's daily movements are now driven by tariff news compared with early April, when tariffs accounted for as much as 80% of daily market moves, Bloomberg noted. Morgan Stanley analysts believe the safe haven provided by Singapore stocks will continue to perform well amid these market swings. Ratings agency Moody's downgraded the US government's credit rating by one notch on May 16, from AAA to Aa1, due to concerns about the nation's growing budget deficit and debt. It was the third of three major rating agencies to do so amid stock market swings. By comparison, Singapore holds an AAA rating, the highest possible, from all three major agencies. Stocks and Treasuries are not the only US assets facing greater volatility; the US dollar has been battered, too. Some investors have sought refuge from the greenback's weakness in the Singapore dollar, which has risen by 5.5% against the US dollar since the start of this year. Bank of Singapore economist Mansoor Mohi-uddin noted on May 2 that the Singapore dollar is a proven long-term store of value, backed by the Monetary Authority of Singapore's (MAS) policy of allowing the currency's trading band to appreciate over time, as well as 'huge foreign reserves'. The Singapore dollar was trading at 1.287 to a US dollar at 9pm local time last Thursday, almost unchanged from the day before, despite some volatility earlier in the day, and not far from its 10-year high of 1.2807 last September. Michael Wan, a foreign exchange analyst at MUFG Bank, noted that the Trump administration has filed a notice of appeal with the US Court of International Trade against its ruling. Wan said he expects that Trump's tariffs will likely remain in effect throughout the appeals process, as the administration is expected to pursue the case all the way to the Supreme Court, implying a prolonged period of legal uncertainty. He added that the initial strengthening of the US dollar against most Asian currencies when the ruling was announced on May 29 will not last, given that 'tariffs on Asia are likely to stay amid the legal battle, coupled with the legal uncertainty also potentially crimping US growth and investment plans further'. Demand for Singapore assets from investors seeking a safe place to park their funds may continue over the longer term. Bank of Singapore's Mohi-uddin noted on May 22 that US Treasuries, the S&P 500 and the US dollar have fallen together on just 10% of all trading days since 1971. 'This year so far, there will already be 10 such days. We expect President Trump's erratic policymaking is set to increase the number of days, keeping us cautious on long-term Treasuries and the US dollar.' Still, MAS managing director Chia Der Jiun noted recently that there are cyclical and structural factors determining the pricing and confidence in the US currency and US dollar assets. 'On the cyclical side, markets are pricing in slower growth, the prospect of higher inflation and questions over the fiscal trajectory in the United States, as well as rotation into other regions and hedging of overweight exposures,' he said at a forum on May 20. 'On the structural side, the US Treasury market is fundamental and systemic to the global financial system, and there is no alternative at this point.' — The Straits Times/ANN
Straits Times
29-05-2025
- Business
- Straits Times
Singapore's safe haven appeal rises as US assets turn more volatile
Traders on the floor of the New York Stock Exchange at the opening bell on May 23, 2025, in New York City. AFP SINGAPORE – Singapore's safe haven appeal is rising as investors seek respite from the volatility unleased by US President Donald Trump's tariff flip-flops and potential tax cuts. Singapore equities have delivered a total return of 13 per cent since the start of 2025 – more than double the MSCI All Country World Index's 6 per cent gain. The gains come as investors move funds into safer and more stable stocks here, noted Morgan Stanley analysts on May 22. One of the causes of market volatility is the so-called 'Taco' trade, a term coined by Financial Times columnist Robert Armstrong referring to 'Trump always chickens out' when it comes to imposing tariffs. Each time Mr Trump backs down, stocks stage a rally. The first notable Taco trade came on April 9, when Mr Trump paused the supersized tariffs he had proposed on April 2 after global stock markets plunged and longer-term US Treasury yields spiked. Soon after, Mr Trump hinted at possibly removing Mr Jay Powell as chair of the US Federal Reserve, only to retreat once markets reacted sharply. Other examples include an agreement to roll back US tariffs of 145 per cent to 30 per cent on most goods imported from China, and a similar pullback by China on US goods. The US and China announced on May 12, after talks in Geneva, that there would be a further 90 days to negotiate and agree on tariffs. On cue, markets recovered. The latest Taco trade was on May 26 and 27, when markets rallied after Mr Trump announced a delay to 50 per cent tariffs on goods from Europe. US stocks remained strong on May 29, after a ruling by the US Court of International Trade stated that Mr Trump had overstepped his authority by imposing across-the-board duties on imports from other nations. But Wall Street is increasingly brushing off tariff threats from Mr Trump: A recent analysis quoted by Bloomberg said the S&P 500 Index's sensitivity to tariff-related headlines has dropped sharply since April. Data showed that just over a third of the S&P 500's daily movements are now driven by tariff news compared with early April, when tariffs accounted for as much as 80 per cent of daily market moves, Bloomberg noted. Morgan Stanley analysts believe the safe haven provided by Singapore stocks will continue to perform well amid these market swings. Ratings agency Moody's downgraded the US government's credit rating by one notch on May 16, from AAA to Aa1, due to concerns about the nation's growing budget deficit and debt. It was the third of three major rating agencies to do so amid stock market swings. By comparison, Singapore holds an AAA rating, the highest possible, from all three major agencies. Stocks and Treasuries are not the only US assets facing greater volatility; the US dollar has been battered, too. Some investors have sought refuge from the greenback's weakness in the Singapore dollar, which has risen by 5.5 per cent against the US dollar since the start of 2025. Bank of Singapore economist Mansoor Mohi-uddin noted on May 2 that the Singdollar is a proven long-term store of value, backed by the Monetary Authority of Singapore's (MAS) policy of allowing the currency's trading band to appreciate over time, as well as 'huge foreign reserves'. The Singdollar was trading at 1.287 to a US dollar at 9pm local time on May 29, almost unchanged from the day before, despite some volatility earlier in the day, and not far from its 10-year high of 1.2807 in September 2024. Mr Michael Wan, a foreign exchange analyst at MUFG bank, noted that the Trump administration has filed a notice of appeal with the US Court of International Trade against its ruling. Mr Wan said he expects that Mr Trump's tariffs will likely remain in effect throughout the appeals process, as the administration is expected to pursue the case all the way to the Supreme Court, implying a prolonged period of legal uncertainty. He added that the initial strengthening of the US dollar against most Asian currencies when the ruling was announced on May 29 will not last given that 'tariffs on Asia are likely to stay amid the legal battle, coupled with the legal uncertainty also potentially crimping US growth and investment plans further'. Demand for Singapore assets from investors seeking a safe place to park their funds may continue over the longer term. Bank of Singapore's Mr Mohi-uddin noted on May 22 that US Treasuries, the S&P 500 and the US dollar have fallen together on just 10 per cent of all trading days since 1971. 'In 2025, there has already been 10 such days. We expect President Trump's erratic policymaking is set to increase the number of days, keeping us cautious on long-term Treasuries and the US dollar.' Still, MAS managing director Chia Der Jiun noted recently that there are cyclical and structural factors determining the pricing and confidence in the US currency and US dollar assets. 'On the cyclical side, markets are pricing in slower growth, the prospect of higher inflation and questions over the fiscal trajectory in the US, as well as rotation into other regions and hedging of overweight exposures,' Mr Chia said at a forum on May 20. 'On the structural side, the US Treasury market is fundamental and systemic to the global financial system, and there is no alternative at this point'. 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Associated Press
29-05-2025
- Business
- Associated Press
AllianceBernstein: Materiality Matters - The ESG Factors That Count
Patrick O'Connell, CFA | Director—Responsible Investing Portfolio Solutions and Research John Huang, CFA | Director of Responsible Investments, Data and Technology—Responsibility Erin Bigley, CFA | Chief Responsibility Officer The materiality of ESG factors differs across sectors and markets. Investors need to understand how. As environmental, social and governance (ESG) factors help contribute to—or detract from—security returns, it makes sense for active investors to integrate them into security selection. But there's a wide disparity in the materiality of ESG factors across investment sectors and markets. In our view, understanding this dynamic is the key to successfully incorporating ESG risks and opportunities into portfolio construction. For many investors, whether fixed income or equity, the process of integrating ESG factors into their strategies begins with correlating the relevance of each factor to individual industries. At a basic level this shows, for example, that greenhouse gas emissions are a particular risk for mining companies and electric utilities, while customer privacy is a key concern for the healthcare sector. This is a good starting point but offers an incomplete perspective. We believe a much deeper dive is necessary to fully dimension the materiality of ESG factors for portfolio performance. Investors need to know how a particular factor may affect investment returns for a given sector or market. Factors Can Have Wide or Narrow Impacts Factor attribution using historical returns can reveal how ESG factors have contributed to investment returns in the past, whether for a sector or an entire investment universe, in equities or in bonds. We've observed that some factors can be financially material for all companies in a market, regardless of sector. For example, we divided stocks in the MSCI All Country World Index into quintiles according to their total recordable incident rate (TRIR)—the number of workplace injuries or illnesses—then compared their returns relative to the parent index over 14 years. The results show that high TRIR consistently underperformed the market and that low TRIR consistently outperformed. Similarly, in the bond market, 'social fines' is a powerful, index-wide factor. Social fines are regulatory penalties imposed for nonenvironmental reasons, such as workplace health and safety and anticompetitive practices. Other ESG factors with broad relevance across investment sectors include CEOs' length of tenure and employee turnover. For investors wishing to integrate ESG factors into their portfolios, it's useful, in our view, to know which factors have index-wide applicability. Factor attribution can also reveal which ESG factors are particularly relevant to a specific sector and which have historically shown no financial materiality. Another advantage of factor attribution is that it can lead to observations that are unexpected and even counterintuitive. We found, for example, that companies with high ESG disclosures broadly performed better than those with low or no disclosures, regardless of whether their ESG practices were good, bad or indifferent. In the case of ESG metrics where there was no significant under- or overperformance relative to the market—CFO tenure and split roles for CEO and chair of the board—companies that disclosed data outperformed companies that didn't disclose, on average. Fundamental Research Enhances Insights from Factor Attribution But factor attribution alone is not enough, in our view; it should complement fundamental research. Understanding the effect of ESG factors on performance is most valuable in the context of broader research into how well a company is managed. For example, fundamental research can show that a high TRIR affects productivity directly, through lost working hours, and indirectly, by creating a culture in which workers are undermotivated because they don't feel safe. Additionally, factor attribution works best with long data series, which are not always available, stressing the importance of fundamental research. Another way fundamental research can help is in measuring ESG factors appropriately to a particular sector, instead of taking the generic approach typically used by many third-party ESG databases. This could mean, for example, measuring carbon emissions in terms of miles per gallon for automakers, per passenger mile for airliners and per ton of cement produced for building-material companies. And it can tease out the nuances underlying many ESG factors. In the case of the mining sector, for example, fundamental research can focus on tailings dam risk within the more broadly defined factors of water and hazardous materials management. As this small snapshot of an ESG materiality matrix shows, these insights can be mapped very simply. But it's the quality of the information behind it that gives the map its value: the understanding of how ESG factors can be financially material across investment sectors, industries and markets. By embedding such knowledge in their securities research and portfolio construction, investors, in our view, may significantly enhance the potential for outperformance. The authors wish to thank Peter Højsteen-Ljungbeck for his contribution. The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to revision over time. MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI. Learn more about AB's approach to responsibility here. Visit 3BL Media to see more multimedia and stories from AllianceBernstein
Time of India
23-05-2025
- Business
- Time of India
Jefferies predicts prolonged Dollar decline as Trump's style and soaring U.S. debt rattle global confidence
The U.S. dollar could be embarking on a long-term downtrend, fueled by escalating economic imbalances and increasing political risk, says a new report from Jefferies. The investment bank cites a worrying combination of factors in support of its prediction, noting America's disproportionate dominance of world stock indices, rising debt levels, and US president Donald Trump's leadership style as warning signs for the US dollar, according to ANI. A Peak in "American Exceptionalism"? Jefferies cited a turning point on December 24 last year, when the US set a record 67.2% of the MSCI All Country World Index , as per the rpeort. Optimism in the market was strong about " American exceptionalism ", according to ANI. The bank also mentioned that "this level was already close to breaking out on the charts, and now the breakout has finally happened," as per ANI. ALSO READ: If Japan dumps U.S. debt, Trump could face a treasury market meltdown that sends yields surging sky-high Live Events While, Jefferies clarified in its report that this would not mean the US stock market would collapse, according to ANI. But the issue is that the US holding 67% of the index is considered unusually high, ANI reported. The ANI report highlighted that, this is important as the US accounts for only 26.4% of the global economy in terms of nominal GDP in US dollar terms and just 14.9% based on purchasing power parity (PPP). This large gap indicates that the US dollar will be on a long-term downward path, as per the report. Donald Trump's Return Adds to Dollar Volatility Jefferies wrote that, "There are several reasons to bet on a weaker dollar. One not unimportant one is that Donald Trump himself wants a weaker dollar," quoted ANI. According to the investment bank, a key reason for the weaker US dollar is Trump due to his unpredictable style of governance and frequent policy changes, especially on tariffs, which create uncertainty in the market, leading to a natural discount on the dollar's value, reported ANI. ALSO READ: How much will Apple iPhones cost in the U.S if Donald Trump imposes 25% tariffs, here's the breakdown Mounting Debt and Post-Covid Strains However, the main reason, as per Jefferies, is the worsening financial condition of the United States following the Covid-19 pandemic, as per the report. The bank also highlighted that the Federal Reserve 's generous policies have also caused more challenges, according to ANI. Jefferies pointed out that it might lead to a rise in financial repression, potentially leading to yield curve control and even exchange controls in the future, as per ANI. While, the increasing gap in savings and the US' rising debt levels are also strong indications that the dollar may continue to weaken in the long run, according to the report. FAQs Why does Jefferies say the US dollar is weakening? Because of rising US debt, political uncertainty, and post-Covid-19 financial strains. Will the US markets crash? No. Jefferies doesn't predict a crash but sees the US dollar losing value over time.
India Gazette
23-05-2025
- Business
- India Gazette
US dollar is now on a long-term downward path: Jefferies
New Delhi [India], May 23 (ANI): The US dollar has likely to be entered in a long-term downtrend because of several economic and political factors that suggest a weaker dollar in the coming years, according to a report by Jefferies. The report highlighted that on 24 December last year, America reached an all-time high of 67.2 per cent share in the MSCI All Country World Index. This was during a time of strong optimism and talk about 'American exceptionalism.' Jefferies noted that this level was already close to breaking out on the charts, and now the breakout has finally happened. However, the report clarified that this does not mean the US stock market will collapse. The issue is that the US holding 67 per cent of the index is unusually high. This is especially significant because the US accounts for only 26.4 per cent of the global economy in terms of nominal GDP in US dollar terms and just 14.9 per cent based on purchasing power parity (PPP). Even when taking into account the large global presence of American tech companies, the number still seems inflated. This large gap suggests that the US dollar is now on a long-term downward path. Jefferies said 'There are several reasons to bet on a weaker dollar. One not unimportant one is that Donald Trump himself wants a weaker dollar'. One reason to expect a weaker dollar, according to Jefferies, is that US President Donald Trump. The report stated that his unpredictable style of governance and frequent policy changes, especially on tariffs, create uncertainty in the market. This kind of unpredictability can result in a natural discount on the dollar's value. But the biggest reason, the report mentioned, is the worsening financial condition of the US after the Covid pandemic. The Federal Reserve's generous policies have added to this problem. The result could be a rise in financial repression, possibly leading to yield curve control and even exchange controls in the future. This growing gap in savings and the US's increasing debt levels are strong signs that the dollar may continue to weaken in the long run. (ANI)
