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Singapore, Malaysia stocks fall amid concerns over US tariffs on Chinese goods

Wall Street's overnight losses also weigh on equities

KUALA LUMPUR (Nikkei Markets) -- Shares in Singapore and Malaysia declined Wednesday, weighed by Wall Street losses and reports that the U.S. is considering imposing tariffs on Chinese goods.

The Singapore's Straits Times Index declined 0.4% to 3,539.41. Malaysia's FBM KLCI index slipped 0.4% to 1,857.06.

The S&P 500 Index fell the most in about two weeks overnight after President Donald Trump replaced his Secretary of State Rex Tillerson. Analysts said Tillerson's firing marked departure of one more moderate voice in Trump's administration after Gary Cohn, who was opposed to U.S. tariffs, resigned as White House's top advisor earlier this month.

Meanwhile, U.S. media reports that Trump is set to impose up to $60 billion of tariffs on Chinese goods for alleged intellectual property theft added to the negative tone.

"Another high-profile departure from the Trump administration and reports of a looming intellectual property trade war with China rattled markets," said Michael McCarthy, chief market strategist at CMC Markets.

The reports on the tariffs and concerns over Tillerson's departure overshadowed a benign U.S. inflation report. The S&P 500 Index had climbed earlier in the session after the U.S. CPI rose 0.2% month-on-month in February as compared with the 0.5% increase in the previous month. The data suggested that the Federal Reserve is unlikely to pursue a more aggressive stance on monetary tightening.

On the STI, Singapore Press Holdings was the day's top loser, slipping 3.1%. City Developments dropped 1.8%, ending a four-day winning run.

Despite the losses, analysts maintained their constructive view of Singapore equity markets. DBS Group Research said in a note that global growth indicators still showed healthy momentum, which is positive for export economies such as Singapore.

"In terms of valuations, Singapore's (equity) market valuations' discount to the region is at or near an all-time low, which is unjustified in our view," it said. "Riding on the cyclical recovery tailwinds, its earnings growth is one of the highest in the region as the recovery broadens out to the services sector and is thus seen to be more sustainable."

Noble Group added 8.4% after signing a binding restructuring agreement with senior creditors that includes a new three-year committed $600 million trade finance provision and a $100 million hedging facility.

In Malaysia, Nestle (Malaysia) tumbled 10.4% to 141 ringgit, the biggest one-day drop since at least 2012. The shares had risen more than 60% since Nestle was included on the KLCI on Dec. 18.

"This is a correction that I've been expecting," Kenanga Investment Bank analyst Clement Chew said. "Relative to its peers like Fraser & Neave Holdings and Dutch Lady Milk Industries, Nestle is the best in terms of capital appreciation and dividend yield. But at current levels, the attractiveness of its yields has diminished, so retail investors are likely to move their funds into other stocks."

Chew expects the shares to drop to as low as 120 ringgit in the coming week, as retailers exit in search of more reasonable yield.

Genting Malaysia, the local unit of hotels-to-gaming conglomerate Genting, rose 0.8% after CIMB Investment Bank highlighted progress on two major theme park projects. Earnings are expected to rise 15% on-year, helped by normalizing hold rates and better gaming volumes, analyst Kristine Wong said. Shares of Genting closed 1.5% higher.

IJM Corp. closed up 0.4% after securing a 1.12 billion ringgit ($287 million) contract to build an underground tunnel and stations for Line 3 of Malaysia's light rail transit.

Industrial-to-auto company UMW Holdings slumped 9.1% amid plans to raise 1.1 billion ringgit through a rights share issue to finance the acquisition of a stake in MBM Resources. The rights issue could dilute 2018-2020 earnings per share by 17% if the company only uses cash to pay minority shareholders, UOB Kay Hian Securities said.

IOI Properties Group dropped 2.2% to its lowest in two years after terminating a joint venture with Hong Kong Land International Holdings for a project in Singapore's Central Boulevard.

"We are negatively surprised by the development as we had previously anticipated the proposed JV to alleviate burden on IO Properties' balance sheet," MIDF analyst Hafriz Hezry said.

--Alexander Winifred & Joannah Perez

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