Skepticism persists after Phase 1 of the US-China trade deal- UOB

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Head of Research Suan Teck Kin, CFA and Head of Markets Strategy Heng Koon How, CAIA at UOB Group gave their opinion on the recent partial US-China trade deal.

Key Quotes

“While the US announced a “substantial” Phase 1 deal, the lack of concrete details and the array of outstanding issues suggest there is still a long way toward full resolution”.

“It will be 3 to 5 weeks toward a detailed agreement for Phase 1 and the uncertainty is likely to keep financial markets on cautious mood in the run up to the APEC Summit on 16-17 Nov”.

“If Phase 1 comes to pass, it could be a baby step towards some kind of trade resolution by the first half of 2020 at the earliest. This remains our base case scenario (60% probability) while our worst case scenario (35% probability) sees both sides unable to agree at Phase 1, leading to the implementation of the delayed and planned tariffs and retaliations extending into other areas including services trade and investment restrictions etc”.

“The uncertainties in trade talks and risk of further growth slowdown in China to 5.9% next year will continue to drive the gradual USD/CNY rise towards 7.20 by end of this year and 7.30 by middle of 2020 in our forecast”.

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