Most investors have heard about about the US-China trade tensions, where both countries are engaged in tit-for-tat sparring in order to push the other into giving concessions. Last week, US President Donald Trump ratcheted up tensions and upped the ante as he slapped a 10% tariff on the remainder of Chinese goods that have so far not been taxed, in effect imposing tariffs on all Chinese imports. China, never one to back down from a challenge, allowed its currency to weaken past 7 to the US dollar in response, triggering accusations by the US that it was engaging in a “currency war.”
Amid these political troubles, markets around the world have been selling off in anticipation of lower global growth, potential deflation (due to the weaker Chinese yuan), and higher supply chain costs. Investors wringing their hands in worry need not fret — there are still great companies to own that are mostly shielded from the current trade tensions and can offer investors a safe harbour and a good night’s sleep.
Here are three such companies and why I think they are great investments despite the current economic turmoil.
1. Sheng Siong Group Ltd
Sheng Siong Group Ltd (SGX: OV8) is one of the largest supermarket chains in Singapore and operates 57 retail outlets all over the island. The group’s outlets are primarily located in the “heartland” HDB areas and offer a good mix of “wet and dry” shopping options, with fresh produce available for purchase as well as sundries and everyday items.
Sheng Siong’s business is targeted mainly at locals and the mass market, so the business will not be adversely impacted by a global trade war. In fact, Sheng Siong just reported a strong set of Q2 2019 earnings, with revenue up 11.8% year on year and net profit up 7.6% year on year. Sheng Siong is a success story of a retailer rising up to challenge the dominance of NTUC FairPrice and Dairy Farm International Holdings Limited (SGX: D01) many years ago.
2. Singapore Exchange Limited
Singapore Exchange Limited (SGX: S68), or SGX, is Singapore’s sole stock exchange operator. The group operates and maintains a platform for the buying and selling of securities such as equities, fixed income, and derivatives. SGX also offers listing, settlement, and clearing services for listed companies.
SGX operates in a monopolistic industry as it is the sole stock exchange in Singapore, and this is a competitive moat in itself. The group has also been beefing up its derivatives division by offering a wider spread of tools (such as options and futures) for investors and traders to hedge their portfolio exposure. Some of SGX’s derivative products include rubber futures, China A-50 Index Futures, and freight derivatives.
With heightened volatility amid the market turmoil, SGX may see even stronger demand for its suite of financial products, thus benefitting the group even further and helping the derivatives division to scale new heights.
3. Boustead Projects Limited
Boustead Projects Limited (SGX: AVM) is an industrial real estate solutions provider in Singapore, with core expertise in design and build developments of industrial facilities for multinational corporations and local enterprises. BPL is a 53%-owned subsidiary of Mainboard-listed Boustead Singapore Limited (SGX: F9D).
In its recent FY 2019 earnings report, BPL announced a record order book of S$660 million in its design and build division. This was the result of the group clinching two mega-contracts each worth more than S$200 million, which have greatly bolstered the company’s order book. Investors need not worry about US-China trade tensions affecting BPL as its business is focused mainly in Singapore, Malaysia, and Vietnam, and this record level of order book can keep the group busy for the next 18 to 24 months.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has recommended shares of Boustead Singapore Limited, Boustead Projects Limited, Sheng Siong Group Ltd, Dairy Farm International Holdings Limited, and Singapore Exchange Limited. Motley Fool Singapore contributor Royston Yang owns shares in Boustead Singapore Limited, Boustead Projects Limited, and Singapore Exchange Limited.