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Nikkei Markets

Malaysia and Singapore equities retreat further

US-China trade tensions to hit emerging economies hardest

KUALA LUMPUR (Nikkei Markets) -- Malaysia and Singapore equities fell further Tuesday as mounting concerns over escalating U.S.-China trade tensions speckled Asian markets with red ink.

The FBM KLCI dropped 1.6% at 1715.36, its seventh consecutive day of losses. The Straits Times Index, extended its decline for the fifth straight session, ending 0.6% lower at 3,303.82. Both the Malaysian ringgit and Singaporean dollar weakened against the dollar.

"It's going to be a characteristically bumpy summer, plus the World Cup is not helping in terms of flows and volumes," Neel Sinha, a Singapore-based strategist at Maybank Kim Eng. We're looking for direction only during the next corporate earnings season when the market gains some consensus."

Most markets in Asia fell after U.S. President Trump threatened new tariffs on Chinese goods worth $200 billion. China's commerce ministry reacted by accusing the United States of having initiated a trade war and warned of further retaliation.

The simmering trade dispute between two of the world's biggest economies will likely hurt both nations and investors fear that further flare up may weaken demand for goods from Asia's export-reliant economies including Singapore and Malaysia. The Nikkei Asia300 index fell 2.4%.

"With no truce in sight, we expect emerging economies to take the biggest hit," Public Investment Bank's economist Rosnani Rasul said. "The spat between these two global giants may ultimately freeze trade momentum just when world trade is about to normalize after years of sub-par growth."

Electronic manufacturing services firms in both markets took a hit. Singapore's Venture Corp. and Valuetronics Holdings fell 4.9% and 4.1%, while in Malaysia, V.S. Industry and SKP Resources lost 7.1% and 3.4%.

Oil prices retreated, weighing on rigbuilders in Singapore and services firm in Malaysia. Keppel Corp and Sembcorp Industries were down 1.0% and 0.4% respectively while Sapura Energy and Dialog Group fell 4.8% and 3.3%

Singapore Airlines fell 0.8% after posting a 3.9% decline in cargo loads across all route regions and analysts said the rising global trade tensions could lower cargo traffic, hurting the airline's revenue growth prospect.

Meanwhile in corporate news, lottery operator Berjaya Sports Toto fell 1.6% on news that its fourth-quarter net profit nearly halved year-on-year. Top Glove Corp., the world's biggest glovemaker by capacity, ended 0.7% lower despite a 51% rise in third-quarter net profit.

In Singapore, real estate developers City Developments lost 1.3% and UOL Group was down 1.6% while CapitaLand fell 1.2%. Data from Urban Redevelopment Authority showed a 38% year-on-year decline in new home sales for the first five months of 2018.

Bucking the trend, Kingsmen Creatives rose 0.9% after its unit secured contracts worth 29 million Singaporean dollar for the FORMULA 1 Singapore Grand Prix.

- Alexander Winifred and Joannah Perez

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