Trade drama keeps investors on alert

Local stocks marked another day of losses as investors tuned in for the latest episode of the US-China drama and the US Federal Reserve's policy review.

High-level US-China trade talks started yesterday with China's Vice-Premier Liu He visiting Washington.

There is apparently a willingness to reach some form of a deal as US Treasury Secretary Steve Mnuchin has said he expects "significant progress" to be made this week.

Yet, the US' earlier accusations of Huawei, China's biggest telecommunication technology giant, committing technology theft and bank fraud set a tricky stage for the trade negotiations. Market observers have noted that the Chinese side has remained fairly silent.

Most Asian markets traded sideways yesterday. On the local front, stocks ended the day in lower territory, with the Straits Times Index retreating 0.42 per cent or 13.31 points to 3,174.38. Advancers outnumbered decliners 215 to 166, as 1.4 billion shares worth $1.17 billion changed hands.

Meanwhile, the US Federal Reserve is set to announce its monetary policy decision following a two day meeting of the Federal Open Market Committee. Market expectations are for zero Fed hikes this year.

But Ms Esty Dwek, senior investment strategist at Natixis Investment Managers, warned that markets shouldn't be too complacent.

"We do not think the Fed's pause will be that long, unless data significantly disappoints in the coming months," she said.

She expects a pause through till March but predicts a hike in June may be on the cards if "data stabilises and trade tensions don't escalate".

However, any gains were offset by some index heavyweights, including the local banks. DBS led losses, giving up 1.16 per cent to $23.94, while United Overseas Bank retreated 0.9 per cent to $25.30. On the other hand, OCBC shed 0.09 per cent to $11.39.

A handful of Reits also headed lower, save for OUE Hospitality Trust, which tacked on 4.32 per cent to $0.725. Yesterday, it posted higher distribution per stapled security (DPS) for the fourth quarter ended Dec 31, 2018. DPS rose to 1.28 Singapore cents, up 0.8 per cent from 1.27 Singapore cents.

Otherwise, CapitaMall Trust ended the day down 1.67 per cent to $2.36. Mapletree Commercial Trust also declined 2.23 per cent to $1.75, as did Starhill Global Reit, which retreated 0.69 per cent to $0.72.

Brighter spots were among offshore and marine stocks.

The US government slapped sanctions on Venezuela's state-owned oil firm PDVSA this week, with the move expected to ease supply glut worries.

Singapore's three biggest shipyard stocks traded mixed on Wednesday. Yangzijiang Shipbuilding gained 3.65 per cent to $1.42 and Sembcorp Marine put on 0.63 per cent to $1.60. However, Keppel Corp was 0.33 per cent lower at $6.07.

In other news, corporate guidance from technology firms remain one to watch, even as Apple delivered earnings in line with analysts' expectations.

Test-handling machine supplier AEM Holdings rebounded strongly, especially after Maybank Kim Eng initiated a "buy" on the stock.

Shares surged 9.39 per cent to $0.99.

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