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Amid the continuous uncertainty produced by the US-China trade tensions, investors are faced with a quandary on how to best utilise their investment war chest.
It is always difficult to avoid complete exposure to the effects of strife between two of the largest economies in the world. With that said, though, here are three Singapore companies investors can consider that could help soften the blow should tensions escalate.
Singapore Telecommunications Limited (SGX:Z74)
Singapore Telecommunications Limited, also known as Singtel, is the largest telecommunications company in Singapore.
With the recent Huawei debacle, investors are understandably concerned about how telecommunications companies like Singtel might be affected in the rollout of 5G technology. Fortunately, Singtel has mitigated this risk, having confirmed that it is working with multiple vendors – in addition to Huawei – in establishing its 5G networks.
Vast Asia-Pacific exposure outside China
Apart from having the lion’s share of the Singapore market, Singtel also has a large footprint in many Asia-Pacific countries. One noteworthy Singtel investment is Optus, a wholly-owned subsidiary in Australia, which has a sizeable market share of over 20% Down Under.
Earlier this year, the company also invested in one of India’s largest telecommunications company; Bharti Airtel. Through Bharti Airtel’s own diversified assets, Singtel has by extension expanded its reach out west across the Indian Ocean to include African markets such as Uganda, Kenya, and Nigeria.
Other noteworthy investments comprise direct ownership and joint ventures such as Globe Telecom in the Philippines, AIS in Thailand, and Telkomsel in Indonesia, further cushioning Singtel from US-China trade complications. Singtel is highly diversified in Asia. Additionally, it has low direct exposure to China, making it a strong investment to consider in a time of uncertainty.
Koda Ltd (SGX:BJZ)
Koda Ltd is a Singapore manufacturing and retail furniture company, with factories in Malaysia and Vietnam. It also has retail stores in several Asia Pacific countries such as Australia, Singapore, and China.
On the flip side of the coin, companies like Koda can actually benefit when their Chinese counterparts are experiencing rising tariffs. Koda’s manufacturing facilities are largely based in Vietnam and Malaysia. This could prove to be an acceleration of growth for the company, as confirmed by Koda’s CEO. He has stated that many of their customers are “looking into sourcing outside China as an alternative source to supply into the US market.”
Vertical integration into retail
Koda has been vertically integrating into retail by establishing Commune, its retail furniture brand, thereby reducing its dependence on the manufacturing sector and opening new doors for growth. This has allowed Koda to capitalise on the US-China trade war: Koda has seen its revenues rise by almost 6% in FY18, much of that increase due to higher sales from Commune – given its largest export market is the US.
Overall, Koda is well-positioned to not only grow due to its diversification in the furniture retail sector but has also begun capitalising on the US-China tariff war itself.
Sheng Siong Group Ltd (SGX:OV8)
Sheng Siong Group Ltd is the third-largest supermarket operator in Singapore, operating 46 supermarkets in many suburban areas of the island as of 2018.
Sheng Siong has a low-cost business model which is an important driver in times of economic uncertainty. Its target customer segment is price-sensitive customers, who will only continue to purchase from them when the economy is weak. Because of this, most of the its supermarket stores are located in areas of public housing, therefore not only reducing operating costs but also providing ease of access to its target customers.
In times of economic uncertainty, Sheng Siong’s zero debt balance sheet can prove to be much sought-after by investors. It reflects a financially conservative management team, which gives you confidence if you are looking to pad your portfolio with risk-averse investments in time of uncertainty.
Sheng Siong Group is a solid company. With its low-cost business model and risk-averse financial management, Sheng Siong could still potentially experience decent growth despite the ongoing trade tensions.
Overall, investors who are concerned about a drawn-out and persistent trade ware between the US and China could look to Singtel, Koda and Sheng Siong as reliable shelters from the tensions. All three offer growth, income, and diversification while also being relatively well-shielded from the fallout of any trade issues between the two world’s largest economies.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Ray Kee does not own shares in any of the companies mentioned.