It doesn’t look like the conflict between the US and China will abate anytime soon. If the trade war worsens, shares could get battered even more. However, that also means there will be a chance for the brave hearts who have a long-term view to buy stocks on the cheap.
With that, here are three Singapore-listed shares you can consider buying should the trade conflict between the US and China worsen.
No. 1: DBS Group Holdings Ltd
DBS Group Holdings Ltd (SGX: D05) is one of the largest banks in the world. Over the past five years, the bank’s total income has grown from S$9.6 billion to S$13.2 billion. Likewise, net profit improved from S$4.0 billion in 2014 to S$5.6 billion in 2018. With the growing income and excess capital in the last few years, the company’s dividend per share climbed from S$0.58 to S$1.20. Another positive is that DBS reiterated in its 2019 first-quarter earnings report that its policy of “paying sustainable dividends that rise progressively with earnings remains unchanged.”
As it is a lender to individuals and businesses, DBS could get hit hard if the trade war worsens. However, the bank is well-capitalised, and that could help cushion it from any economic shocks. As of 31 March 2019, DBS’s common equity tier 1 capital adequacy ratio was 14.1%, well above the regulatory requirement of 6.5%.
Those who picked up DBS shares in 2016 (when there were widespread economic fears) at an average share price of S$15.44 (price-to-book ratio of 0.9) would be sitting on huge gains right now. Currently, the bank’s shares are selling at S$25.43 apiece. A protracted trade war could present another opportunity to pick up DBS shares at a low valuation.
No. 2: Straco Corporation Ltd
Straco Corporation Ltd (SGX: S85) owns and operates tourism attractions in China and Singapore. In China, the company owns the Shanghai Ocean Aquarium, Underwater World Xiamen, and Lintong Lixing Cable Car attractions. In Singapore, Straco has a majority stake in the iconic observation wheel, Singapore Flyer.
According to Straco’s management, trade tensions between the two superpowers have “resulted in weaker visitor numbers.” However, visitors should swarm Straco’s attractions again once consumer confidence returns.
Also, shareholders will get paid to wait as Straco has been increasing its annual dividends since its initial public offering. That dividend growth should continue thanks to the company’s stable overall business.
No. 3: iFAST Corporation Ltd
iFAST Corporation Ltd (SGX: AIY) is an Internet-based investment products distribution platform that provides a comprehensive range of investment products and services to both corporate clients and retail investors.
Should the trade war remain protracted, the company’s assets under administration (AUA) could fall. This is exactly what happened in the fourth quarter of 2018: iFAST’s AUA tumbled 5.3% quarter on quarter to S$8.05 billion due to volatility in the financial markets.
However, over the long term, iFAST should be able to grow its AUA thanks to the massive size of Asia’s wealth management industry. The company has also been generating copious amounts of free cash flow and paying stable dividends as a result.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of DBS, Straco, and iFAST. Motley Fool Singapore contributor Sudhan P owns shares in Straco and iFAST.