CGS International has released a strategy note advising investors to focus on large-cap defensive stocks in Singapore as the nation grapples with a 10% tariff on its exports to the US. The note, authored by analysts Lock Mun Yee and Lim Siew Khee, highlights the potential negative spillover effects on Singapore’s economy despite the exclusion of semiconductors and pharmaceuticals from the tariffs.
The strategy note suggests that investors should consider stocks such as ST, CLAR, KDCREIT, and STE, which are seen as more stable amidst the current economic uncertainties. Conversely, stocks like SATS and YZJSB, which are directly impacted by tariffs, may experience choppy sentiment. Additionally, companies with significant exposure to Vietnam, Malaysia, and Thailand, such as KEP, FPL, and THBEV, could face challenges due to high tariffs in these regions.
The ASEAN+3 Macroeconomic Research Office (AMRO) warns that increased protectionism could reduce regional growth by 1-2 percentage points over 2026 to 2027, potentially bringing Singapore’s GDP growth to the lower end of the 1.0% to 3.0% forecast range. CGS International currently predicts a 2.5% GDP growth for Singapore in FY25.
The note also addresses the impact on tech companies, which are navigating tariff challenges through strategies like the “China+1” approach. However, with new tariffs in Malaysia and Vietnam, these companies are reassessing their strategies. The end of de minimis tariff exemptions for small packages from China and Hong Kong could further increase costs and affect demand.
In light of these developments, CGS International reiterates a near-term risk-off strategy, advocating for investments in stocks with more predictable earnings and high dividend yields.
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