Bought Deal

Using a bought deal, an investment bank agrees to acquire a client company’s shares at a predetermined price before selling them. This strategy protects investors from constant market fluctuations by providing cash promptly.

Investments made by investors may be made swiftly and confidently to reduce existing owners’ shares and require compliance with authorities. Companies must comprehend buy transactions to navigate complex capital markets and meet financial objectives.

Table of Contents

What is a bought deal?
Understanding bought deal
Key characteristics of bought deals
Usage and applications of bought deal
Benefits and considerations
Frequently Asked Questions

What is a bought deal?

A bought deal is a financial arrangement where an investment bank commits to purchasing all securities directly from a client company. This strategy eliminates supplier funding concerns and acquires the money investors need without uncertainty. Before closing, the seller and broker agree on the price and quantity of shares sold in a bought deal.

Investors acquire stocks or bonds when buying securities and sometimes acquire these stocks to sell them immediately for a profit. Bought deal simplifies acquiring money and minimises the investors’ market risk, but releasing more shares at once might diminish present equity holdings.

Understanding bought deal

An investment bank backs a bought deal financing offering by promising to acquire many shares or bonds from the selling companies. The corporation selling equities wants to reduce the financial risk of under subscription, which ensures sufficient funding is raised.

After this transaction, the seller will sell the shares to other bidders. The school will keep its word. This usually happens before the prospectus is submitted. It must be completed before the shares are sold because process time is crucial.

When marketing most transactions, investors may require a pre-marketing strategy to gauge the company’s interest. The investors must ensure the agreement is executed swiftly, accurately, and in line with all regulations and document requirements.

Key characteristics of bought deals

Pre-determined pricing

In a bought deal, the investors agree on the share price before becoming public, known as predetermined pricing. Everyone participating in the deal knows the precise parameters from the outset, and market-driven pricing changes security values based on investor’s demand and market conditions.

Swift completion

Bought deals are renowned for their speed of execution. After agreeing on the conditions, the transaction is usually completed in a day or two due to deal constraints. Issuers that need funds immediately without the marketing and price-finding operations of traditional offerings may benefit from this speedy turnaround.

Immediate capital

Upon closing a bought deal, the issuer receives immediate funds from the investors, and this immediate cash injection offers the seller protection and liquidity, allowing them to pay financial obligations or take advantage of short-term market possibilities. Buying stuff helps gain credit, which is essential when time is short.

Reduced price volatility

By fixing the price of securities before the offering, bought deals help mitigate price volatility. Set pricing ensures that equities are sold at a consensus price, which reduces the likelihood of pricing changing fast after the contract if the market determines prices. This price stability may benefit investors who desire consistent investment decisions.

Certainty of funding

Issuers may need more certainty about whether an offering will be filled or overrun by acquiring investor’s commitments because insurance may guarantee ahead of time. This financing guarantee is crucial when the market is unclear, or enterprises must satisfy urgent financial commitments without delays or insufficient funds.

Usage and applications of bought deal

Usage of bought deals

Rapid capital infusion

Companies that need a lot of money rapidly may buy bought deals. Issuers can immediately capitalise on market opportunities, make sensible investments, or meet new company demands since they can access funds quickly.

Debt repayment

Companies generally pay off debts with money from acquisitions, which helps investors satisfy their financial obligations. Lowering debt may boost the issuer’s credibility with investors and lenders, increasing their financial possibilities, cutting their borrowing expenses, and improving their finances.

Expansion initiatives

Bought deals may be lucrative for expanding companies, and investors employ acquired transactions to fund strategic growth, including adding new product lines, entering new regional markets, and investing in infrastructure. Having money from acquired transactions allows investors to make decisions with confidence.

Applications of bought deals

Market Stability

Bought deals stabilise the market by setting stock prices before they are publicly traded. If market demand changes after the transaction, share prices may vary, and a regular pricing plan builds investor confidence and long-term market conditions.

Sector diversification

Investors acquire other companies in bought deals to grow into new sectors, and enterprises might directly invest part of their resources in new enterprises, known as sector diversification. This expands their consumer base and reduces their dependence on particular products or marketplaces.

Strategic partnerships

Bought deals together help develop strategic alliances or combined enterprises. Companies utilise fast revenue from acquisitions to boost joint activities, collaborations, or strategic connections with other entities, which improves corporate advantages and provides mutually beneficial development opportunities.

Benefits and considerations

Benefits of bought deals

Certainty of funding

Bought deals guarantee issuers’ capital rise, which may be achieved by securing investors’ commitments in advance. This assurance eliminates investor demand and subscription concerns, eliminating market-driven offer uncertainties.

Risk Mitigation

One of the most excellent things about a bought deal is the insurer can offer security. After investors approve stock purchases, the broker sells them at a profit, and this risk transfer shields the seller from market volatility and selling pressures.

Efficient capital structure management

Bought deals simplify capital structure management. When businesses get money simultaneously, they may increase financial independence, balance sheet efficiency, and debt reduction.

Considerations of bought deals

Pricing sensitivity

When a bought deal employs predetermined pricing, sellers may obtain less than in a market-driven sale, where prices move depending on the investor’s demand because purchased transactions utilise predetermined prices.

Market Perception

The company’s significant acquisitions may not please the market or shareholders. If stakeholders believe the situation indicates the company has money issues or depends too much on outside money, they may have these sentiments.

Regulatory compliance

Existing stock transactions must follow tight regulations and legislation to ensure compliance, and selling securities is difficult due to these laws, which may cost corporations more. Investors must meet legal norms to avoid penalties.

Frequently Asked Questions

What types of securities are typically involved in a bought deal?

Bought deals typically involve stocks, also known as equity securities, and bonds, which are debt securities. Before investors acquire these stocks, the buyer will buy them directly from the seller at a predetermined price. A typical offering sees securities offered to purchasers and prices are set depending on investor demand.

How does a bought deal differ from a traditional offering?

A bought deal differs from a traditional offering primarily in how securities are priced and sold. Issuers usually display their shares to investors during a typical sale, and investor demand and market performance determine stock prices. Unlike regular offers, which include more uncertainty and market-based pricing, this one states that the seller knows how much their shares are worth and can immediately obtain the money.

What are the benefits for issuers in a bought deal?

Bought deals benefit companies because they make it easier to collect money immediately. Unlike ordinary transactions, investor agreements provide customers peace of mind that they will obtain their money without waiting, which might fluctuate depending on supply. If the issuer sells shares to investors, the broker assumes market risk.

What are the risks associated with bought deals?

Sellers and buyers of securities must consider the risks of purchased trades. If market circumstances worsen, shareholders may have unsold shares. Investors may lose money if additional shares are offered, and the existing partners may also control less of the company.

How are bought deals regulated?

Bought deals are subject to strict regulations imposed by securities authorities and regulatory bodies. These standards monitor contract creation, promotion, and execution to ensure honesty, fairness, and transparency in the financial market. Regulators prevent market exploitation and provide accurate information sharing.

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Buffer ETFs — What Are They and How Do They Work?

Published on Dec 16, 2025 169

Introduction to Buffer ETFs Buffer ETFs are constructed using options and are also known as defined-outcome ETFs, offering investors a preset range of potential returns and risks over a typical one-year period. In other words, they’re designed to limit downside losses while still allowing you to stay invested in the market. Think of them as a way to smooth out volatility without completely giving up growth opportunities. First Trust Vest US Equity Buffer ETF - December 2025 (FDEC) Here’s a quick illustration: FDEC.US offers up to 14.76% potential upside while absorbing the first 10% of market losses. This allows investors to participate in potential growth with a built-in buffer. If SPY.US finishes the outcome period with returns between 0% and –10%, the investor would not incur losses (before fees). Overview of MAS SIP Requirements As Buffer ETFs use more complex structures, they fall under Specified Investment Products (SIPs). This means investors must demonstrate a certain level of knowledge before trading them. Since 2012, in alignment with the Monetary Authority of Singapore's efforts to enhance trading protections for retail investors, brokers are required to assess an investor's relevant knowledge and experience before permitting investments in SIPs. As a result, investors must complete the Customer Account Review (CAR) eligibility form before being allowed to invest in listed SIPs. If you’re new to these products, you can build your understanding by completing the SIP product knowledge module offered through the SGX Academy to become eligible to trade. How does Buffer ETFs work? Buffer ETFs achieve their defined outcomes through the use of options strategies, primarily by combining long and short options on market indices such as the S&P 500. By understanding how these option combinations work, you can better appreciate how the ETF is constructed and how its risk-reward profile is designed. This makes it easier to evaluate whether a Buffer ETF aligns with your investment goals, especially in volatile market conditions. First Trust Vest US Equity Buffer ETF - December 2024 (FDEC) The payoff structure of FDEC.US can be visualised via the risk-return chart available on the First Trust website, as well as those of other Buffer ETF issuers. The diagram illustrates how the downside buffer and upside cap interact to shape investor outcomes over the defined outcome period. According to the fund’s Objective/Strategy section, FDEC.US aims to deliver returns (before fees and expenses) that match the price return of the SPY ETF (which tracks the SP500 index), up to a predetermined upside cap of 14.76%, while providing a 10% buffer against the first losses of the reference asset for the outcome period from 23 December 2024 to 19 December 2025. Buffer ETFs, such as FDEC.US, typically reset annually. The options contracts that underpin the buffer-cap structure expire at the end of the outcome period, after which a new outcome period begins with newly defined cap and buffer levels, based on prevailing interest rates and market volatility. Investors can hold the ETF through the expiry of one period and into the next; however, it is essential to note that the cap and buffer terms may vary from one period to the next. Why Buffer ETFs Are Designed for Long-Term Investors Buffer ETFs work best when held for the entire outcome period, as this allows the built-in options strategy to fully deliver the intended balance between downside protection and capped upside participation. Entering or exiting mid-period can result in different outcomes from those originally designed. S&P 500 Historical Annual Returns (1927-2025)Source: Macrotrends Looking at the historical data, the S&P 500 has delivered strong average returns over time. While positive years are more common, market downturns can still occur, and the index is typically down by around 10% during negative periods. Therefore, Buffer ETFs may serve as a useful tool for managing downside risk, given the built-in buffer. The Drawbacks and Risks of Buffer ETFs 1. Limited Upside (Capped Returns) Buffer ETFs offer downside protection but cap upside potential. If the market rallies strongly, investors will not fully participate, resulting in an opportunity cost compared to traditional index ETFs. 2. Protection Only Works Within a Specific Outcome Period Each Buffer ETF operates within a defined outcome period (typically one year). The buffer and upside cap apply only when the ETF is held for the full period, due to the structure of the underlying options. Selling before the end of the outcome period may lead to unexpected losses or reduced gains. Buying mid-cycle may result in a partially utilised buffer or a lower effective cap. 3. The Buffer Can Be “Used Up” If the underlying index declines more than the stated buffer (e.g., a 10% buffer versus a 20% market drop), the ETF will begin to experience losses beyond the protected range. The buffer does not eliminate all downside risk. 4. Potential Underperformance in Flat or Choppy Markets When markets are sideways or mildly volatile, the combination of capped upside and embedded options costs can cause Buffer ETFs to underperform a standard index ETF tracking the same benchmark. 5. Higher Expense Ratios Buffer ETFs generally carry higher management fees, typically around 0.5% to 1%, compared with traditional S&P 500 ETFs, which often charge less than 0.05%. 6. Return Lag in Volatile Markets Because Buffer ETFs are constructed using options, sharp market movements can cause pricing lag due to changes in option premiums. For example, if the S&P 500 (SPY.US) rises 5% during a volatile period, a corresponding Buffer ETF might rise only around 4.2%, depending on where it is in its outcome period and how its options are priced. List of Buffer ETFs Buffer ETFs are designed to provide downside protection while allowing investors to participate in market gains, making them an attractive choice for those seeking a more controlled approach to equity investing. Below is a list of popular Buffer ETFs available in the market: Issuer Underlying Offered Buffer ETFs Ticker Code First Trust SPY Monthly 10% Buffer FJAN, FFEB, FMAR, FAPR, FMAY, FJUN, FJUL, FAUG, FSEP, FOCT, FNOV, FDEC iShares IVV Quarterly 10% Buffer STEN, TEND, TENM, TENJ First Trust QQQ Quarterly 10% Buffer QMAR, QJUN, QSPT, QDEC First Trust EFA Quarterly 10% Buffer YMAR, YJUN, YSEP, YDEC These ETFs are suited to investors seeking strategic market exposure with controlled risk, particularly in volatile market environments. Should You Invest in a Buffer ETF? Buffer ETFs can be an attractive choice for investors looking to gain exposure to equity markets while actively managing risk. These ETFs offer built-in downside protection, which can help mitigate the impact of moderate market declines and provide clearly defined potential gains and losses over a fixed outcome period. They are particularly suited for investors with a tactical investment approach who intend to hold the ETF for the full outcome period to fully benefit from the buffer structure. By tracking major indices such as the S&P 500 or the Nasdaq 100, Buffer ETFs also offer diversified exposure to both US and international equities. However, investors should be aware that the upside returns are capped, meaning they may miss out on large market rallies, and that early exits or mid-cycle purchases can reduce the effectiveness of the protection. In addition, higher expense ratios and embedded option costs can slightly impact returns compared with traditional ETFs. Overall, Buffer ETFs are best viewed as a complement to a broader investment portfolio, offering a balance between growth potential and controlled downside risk, particularly in uncertain or volatile market conditions. Start Your Global Investment Journey Today! Open an account with POEMS and take the first step toward a diversified, globally-focused portfolio! For more information about trading on POEMS, you can visit our website or reach out to our Night Desk representatives at 6531 1225. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. 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Oracle Raises FY27 Revenue Guidance by $4B on Strong Cloud Growth

Published on Dec 16, 2025 87

Oracle Corporation, a leading enterprise software and cloud computing company, has demonstrated solid performance in the first half of fiscal 2026, with revenue and adjusted profit after tax and minority interests meeting expectations at 47% and 43% of full-year forecasts respectively. The technology giant specialises in database management systems, cloud infrastructure services, and enterprise software solutions, positioning itself as a comprehensive provider in the rapidly evolving artificial intelligence and cloud computing landscape. Strong Performance Driven by Cloud Infrastructure Demand The company's financial results showcase robust momentum, with group revenue climbing 14% year-over-year, primarily propelled by Oracle Cloud's impressive 24% annual growth. This expansion reflects the increasing enterprise demand for cloud infrastructure services as organisations continue their digital transformation initiatives. Additionally, Oracle recorded a substantial $2.7 billion pre-tax gain from divesting its interest in Ampere Computing, further strengthening its financial position. Raised Capital Expenditure and Revenue Projections Oracle has significantly increased its capital expenditure forecast to $50 billion for FY26, representing a $15 billion upward revision from the first quarter projection. This substantial investment reflects the company's commitment to expanding its data center infrastructure to meet growing demand. The company has also raised its FY27 revenue guidance by US$4 billion, supported by higher remaining performance obligations this quarter. For the third quarter of FY26, Oracle projects group revenue growth of 16-18%, with Oracle Cloud expected to accelerate dramatically to 37-41% year-over-year growth, compared to 25% in the previous year. Adjusted earnings per share are anticipated to increase 16-18% to US$1.70-US$1.74. Investment Outlook and Strategic Position Phillip Securities Research maintains a BUY recommendation with a slightly adjusted DCF target price of $344, down from the previous $350, primarily due to the increased capital expenditure requirements. The research firm expects performance acceleration in the second half of FY26 as additional data centres become operational. Oracle's strategic positioning as a specialized Oracle Cloud Infrastructure provider and comprehensive AI solutions company, backed by a significant remaining performance obligations backlog, supports the positive outlook. The company's potential upside depends largely on the successful execution of multi-billion-dollar artificial intelligence deals. Frequently Asked Questions Q: What were Oracle's key financial highlights for the first half of FY26? A: Oracle's 1H26 revenue and adjusted PATMI were within expectations at 47% and 43% of FY26 forecasts respectively. Group revenue rose 14% year-over-year, led by Oracle Cloud's 24% growth, and the company recorded a $2.7 billion pre-tax gain from selling its Ampere Computing interest. Q: How much has Oracle raised its FY27 revenue guidance? A: Oracle has raised its FY27 revenue guidance by $4 billion following higher remaining performance obligations this quarter. Q: What is Oracle's current capital expenditure projection for FY26? A: Oracle has increased its FY26 CAPEX projection to $50 billion, which is $15 billion higher than the 1Q25 forecast Q: What growth rates does Oracle expect for Q3 FY26? A: For 3Q26, Oracle expects group revenue growth of 16-18%, with Oracle Cloud accelerating to 37-41% year-over-year growth, up from 25% a year ago. Adjusted EPS is projected to rise 16-18% to $1.70-1.74. Q: What is Phillip Securities Research's recommendation and target price for Oracle? A: Phillip Securities Research maintains a BUY recommendation with a DCF target price of $344, down from the previous $350 due to increased CAPEX requirements. Q: What factors support Oracle's positive outlook according to the research? A: Oracle's position as a niche Oracle Cloud Infrastructure provider and full-stack AI provider, supported by a significant remaining performance obligations backlog, supports the bullish outlook. The company is expected to benefit from acceleration in 2H26 as more data centers come online. Q: What could drive potential upside for Oracle's stock? A: Potential upside for Oracle hinges on faster execution of multi-billion-dollar artificial intelligence deals, which could accelerate the company's growth beyond current projections. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.

Adobe Inc Delivers Solid FY25 Results as Semrush Acquisition Strengthens Marketing Portfolio

Published on Dec 16, 2025 38

Strong Financial Performance Meets Expectations Adobe Inc. has delivered solid fiscal year 2025 results in line with analyst expectations, with revenue and adjusted profit after tax and minority interest reaching 101% and 100% of forecasts, respectively. The company's fourth-quarter 2025 adjusted profit after tax and minority interest grew 8% year-on-year to US$2.3 billion, driven by stronger revenue performance and improved operating leverage across its business segments. Company Overview and Market Position Adobe Inc operates as a leading software company specializing in creative and marketing solutions for professionals and enterprises. The company's core business revolves around subscription-based services, positioning it as a dominant player in the digital content creation and marketing technology sectors. Strategic Acquisition and Forward Guidance Looking ahead to the first quarter of fiscal year 2026, Adobe has provided optimistic guidance, with adjusted earnings per share expected to be US$5.85 to US$5.90, representing 16% year-over-year growth. Revenue is projected to reach US$6.25 to US$6.30 billion, marking 10% year-on-year growth. This growth is expected to be driven primarily by a 10% increase in Creative and Marketing Professionals Subscription revenue, forecast to reach US$4.3 to US$4.33 billion. The company's strategic US$1.9 billion acquisition of Semrush is anticipated to close in the first half of fiscal year 2026, with minimal earnings-per-share impact in the initial year, before becoming accretive thereafter. This acquisition is expected to strengthen Adobe's marketing capabilities and expands its addressable market. Investment Outlook and Recommendation Phillip Securities Research maintains a BUY recommendation for Adobe Inc, though with a revised DCF target price of US$487, down from the previous US$560. For fiscal year 2026, analysts expect 10% revenue growth and 6% earnings-per-share growth, supported by increased adoption of artificial intelligence and higher subscription revenue. The research firm retains a 7.3% weighted average cost of capital but has lowered the terminal growth rate to 3.5% from 4%, reflecting increased competition from generative AI solutions among smaller customers. However, risks remain limited for enterprise clients utilizing Adobe for complex workflows, where third-party models complement rather than compete with the platform. Frequently Asked Questions Q: What were Adobe's FY25 financial results compared to expectations? A: Adobe's FY25 results met expectations with revenue and adjusted PATMI at 101% and 100% of forecasts, respectively. The 4Q25 adjusted PATMI increased 8% year over year to US$2.3 billion. Q: What is Adobe's guidance for 1Q26? A: Adobe expects adjusted EPS of US$5.85-5.90 (16% YoY growth) on revenue of US$6.25-6.30 billion (10% YoY growth), with Creative & Marketing Professionals Subscription revenue growing 10% to US$4.3-4.33 billion. Q: When will the Semrush acquisition close, and what is its expected impact? A: The US$1.9 billion Semrush acquisition is expected to close in the first half of FY26 with minimal EPS impact in the first year but will be accretive thereafter. Q: What is Phillip Securities Research's recommendation and target price? A: Phillip Securities maintains a BUY recommendation with a DCF target price of US$487, down from the previous US$560. Q: What are the expected growth rates for FY26? A: For FY26, analysts expect 10% revenue growth and 6% EPS growth, supported by rising AI adoption and higher subscription revenue. Q: What factors led to the lower target price? A: The lower target price reflects a reduced terminal growth rate to 3.5% from 4% due to increased competition from generative AI among smaller customers, while maintaining a 7.3% WACC. Q: What risks does Adobe face from AI competition? A: Risks remain limited for enterprise clients using Adobe for complex workflows, where third-party AI models complement the platform rather than compete directly with it. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.

Magnificent 7 Tech Stocks Post Mixed Performance in November 2025

Published on Dec 16, 2025 23

The Magnificent 7 technology stocks experienced a challenging November 2025, with the group declining 1.9% as investors rotated out of mega-cap technology names into cyclical and financial sectors. Despite underperforming the S&P 500's 1.2% gain, the group still outperformed the NASDAQ, which fell 2.0% during the month. Market Rotation Drives Mixed Results The month was characterised by significant profit-taking and renewed valuation concerns, triggering a pronounced sector rotation away from large-cap technology stocks. This shift reflected investors' growing appetite for cyclical and financial names as market dynamics evolved. Individual performance within the Magnificent 7 varied dramatically. Google (GOOGL) emerged as the standout performer, surging 14% following the successful launch of its Gemini 3 AI model. Apple (AAPL) also posted solid gains of 3%, benefiting from strong iPhone demand and effective cost-cutting measures that supported margins. However, these gains were offset by notable declines in other group members. NVIDIA (NVDA) fell 13% as investors rotated out of AI-focused stocks amid growing valuation concerns in the sector. Tesla (TSLA) declined 6% as intensifying price competition in the electric vehicle market led to margin erosion pressures. Investment Outlook Remains Positive Despite November's mixed performance, Phillip Securities Research maintains an OVERWEIGHT recommendation on the Magnificent 7 stocks. The team believes that earnings growth for these companies, excluding Tesla, will continue to outpace both the S&P 500 and the NASDAQ 100. Several key tailwinds support this optimistic outlook. The adoption and demand for artificial intelligence technologies continues to expand globally, with sovereign nations including the European Union and United Arab Emirates increasing their AI investments. Additionally, the US government's AI Action Plan, unveiled in July 2025, is expected to provide further support for the sector. The research also points to anticipated monetary policy changes, with more rate cuts expected in 2026, which could provide a favourable environment for technology stocks to resume their growth trajectory. Frequently Asked Questions Q: How did the Magnificent 7 perform compared to major indices in November 2025? A: The Magnificent 7 declined 1.9%, underperforming the S&P 500's 1.2% gain but outperforming the NASDAQ's 2.0% decline. Q: What caused the sector rotation away from mega-cap technology stocks? A: The rotation was triggered by profit-taking and renewed valuation concerns, leading investors to move into cyclical and financial sectors. Q: Which Magnificent 7 stocks performed best in November? A: Google (GOOGL) was the top performer with a 14% gain due to its successful Gemini 3 AI model launch, followed by Apple (AAPL) with a 3% increase. Q: Why did NVIDIA decline during the month? A: NVIDIA fell 13% due to investor rotation out of AI-focused stocks and growing valuation concerns in the artificial intelligence sector. Q: What is Phillip Securities Research's recommendation on the Magnificent 7? A: The firm maintains an OVERWEIGHT recommendation on the Magnificent 7 stocks, believing their earnings growth will continue to outperform major indices. Q: What factors support the positive outlook for these stocks? A: Key tailwinds include greater AI adoption by sovereign nations like the EU and UAE, the US government's AI Action Plan from July 2025, and expected rate cuts in 2026. Q: Which stock is excluded from the positive earnings growth outlook? A: Tesla (TSLA) is excluded from the expectation that Magnificent 7 earnings will outperform the S&P 500 and NASDAQ 100. Q: What challenges did Tesla face in November? A: Tesla declined 6% due to price competition in the electric vehicle market that led to margin erosion pressures. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.

Sembcorp Industries Enters Australian Energy Market via S$4.8bn Alinta Deal

Published on Dec 16, 2025 16

Strategic Acquisition Overview Sembcorp Industries Ltd has announced its agreement to acquire Alinta Energy for S$4.8 billion in an all-cash transaction, marking a significant expansion into the Australian energy market. The acquisition will be funded through a bridging loan, with no equity fundraising required. This strategic move reflects Sembcorp's efforts to secure new growth opportunities amid challenges in traditional markets. The company has been seeking sustainable growth avenues amid diminishing opportunities in China and softer electricity spreads in Singapore. The potential listing of its Indian renewable energy assets could further dilute the company's growth trajectory, making the Australian market expansion particularly strategic. Company Profile and Market Position Sembcorp Industries operates as a leading energy and utilities company with a significant presence across multiple markets. Alinta Energy Asset Portfolio The acquisition of Alinta Energy brings substantial energy generation capacity to Sembcorp's portfolio. Alinta Energy operates 3.4 gigawatts of power generation capacity across Australia, with a diversified energy mix comprising 43% gas, 33% coal, 17% wind, and 7% solar generation. Additionally, the acquisition includes access to a development pipeline of 10.4 gigawatts of largely renewable capacity, providing significant future growth potential. Financial Impact and Investment Merits The acquisition demonstrates substantial financial benefits for Sembcorp Industries. On a trailing 12-month basis through June 2025, the transaction is expected to be 23% accretive to profit after tax and minority interests on a pro forma basis, excluding amortization of intangibles—post-acquisition, the enterprise value to EBITDA multiple drops modestly to 8.3 times. However, the acquisition will increase financial leverage, with net debt to EBITDA rising from 3.6 times to 4.6 times, representing an additional S$5.8 billion in net debt. The Australian energy market structure differs from Singapore's, featuring fewer long-term contracts, which may result in higher margin volatility. Research Recommendation and Outlook Phillip Securities Research maintains its BUY recommendation for Sembcorp Industries while adjusting their target price from S$7.90 to S$7.10. The price reduction reflects lowered Singapore electricity spread assumptions, with EBITDA and net profit forecasts reduced by 7% and 12% respectively. The Alinta acquisition has not been incorporated into current forecasts, pending shareholder approval and expected completion in the first half of 2026. Frequently Asked Questions Q: What is the total value of Sembcorp's acquisition of Alinta Energy? A: Sembcorp Industries has agreed to acquire Alinta Energy for S$4.8 billion, to be paid fully in cash through a bridging loan facility. Q: What type of energy generation capacity does Alinta Energy operate? A: Alinta Energy operates 3.4 gigawatts of power generation capacity across Australia, with 43% gas, 33% coal, 17% wind, and 7% solar generation facilities. Q: How will the acquisition impact Sembcorp's financial performance? A: The acquisition is expected to be 23% accretive to profit after tax and minority interests on a trailing 12-month basis, while the EV/EBITDA ratio will drop modestly to 8.3 times post-acquisition. Q: What are the potential growth opportunities from this acquisition? A: The acquisition provides access to a development pipeline of 10.4 gigawatts of largely renewable capacity for future expansion opportunities. Q: How will the acquisition affect Sembcorp's debt levels? A: Net debt to EBITDA will increase from 3.6 times to 4.6 times, representing an additional S$5.8 billion in net debt following the acquisition. Q: What is Phillip Securities Research's recommendation and target price? A: Phillip Securities Research maintains a BUY recommendation while reducing the target price from S$7.90 to S$7.10 due to lower Singapore electricity spread assumptions. Q: When is the acquisition expected to be completed? A: The acquisition requires shareholder approval and is expected to be completed in the first half of 2026. Q: What are the main risks associated with this acquisition? A: The Australian energy market has fewer long-term contracts compared to Singapore's market, which may lead to higher margin volatility for the combined entity. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.

Singapore Banking Sector Sees Mixed Outlook Amid Rate Declines

Published on Dec 16, 2025 19

Singapore's banking sector continues to navigate in a challenging interest rate environment, with Phillip Securities Research maintaining a NEUTRAL stance on the sector while highlighting both headwinds and opportunities ahead. Key Market Developments Recent data points to mixed conditions across the secor. November's 3-month Singapore Overnight Rate Average (SORA) declined 14 basis points month-on-month to 1.26%, marking the lowest level since July 2022 and representing a substantial 203 basis points year-on-year decrease. Despite the softer rate environment, loan growth momentum remained positive, with October 2025 figures showing 6.5% growth and year-to-date loans up 5.7% year-on-year. Banks continue to guide towards low to mid-single-digit growth expectations for the remainer of the year. On the deposit front, Current Account and Savings Account (CASA) balances rose 13% year-on-year, though the CASA ratio to total deposits dipped slightly to 19.4% in October 2025. Nevertheless, higher CASA balances serve as a tailwind for banks by helping to lower funding costs. Investment Outlook and Challenges The continued decline in interest rates across both Singapore and Hong Kong markets has pressured banks' net interest margins (NIMs), directly impacting net interest income and overall earnings. Phillip Securities Research expects earnings to decline in FY25, due to lower net interest income, despite anticipating that deposit rate cuts will benefit funding costs in the second half of 2025 and help ease NIM compression. Sector Recommendations and Preferences Within the sector, Phillip Securities Research upgraded OCBC from Neutral to ACCUMULATE, raising the target price to S$20.00 from S$17.00. This upgrade reflects adjustments to the terminal growth rate to 3% from 2% and the beta value from 1.2 to 1.1, recognising OCBC's strong wealth management growth and excess capital position. The research house expresses a preference for DBS, citing its fixed dividend policy, and OCBC, highlighting its strong wealth management growth and excess capital. Despite earnings headwinds, the sector's 5.5% dividend yield remains attractive, with capital return initiatives expected to continue in FY25. Share buyback programmes are expected to improve return on equity and earnings per share. Frequently Asked Questions Q: What is the current outlook for Singapore's banking sector? A: Phillip Securities Research maintains a NEUTRAL stance on the sector, citing declining interest rates that are affecting banks' net interest margins and earnings, though dividend yields remain attractive at 5.5%. Q: How has loan growth performed in Singapore banks? A: Loan growth continues to climb with October 2025 showing 6.5% growth and year-to-date 2025 loans up 5.7% year-on-year, with banks guiding for low to mid-single digit growth. Q: What happened to interest rates in Singapore recently? A: November's 3-month SORA declined 14 basis points month-on-month to 1.26%, the lowest since July 2022, and fell 203 basis points year-on-year. Q: Which banks does Phillip Securities Research prefer and why? A: The research house prefers DBS for its fixed dividend policy and OCBC for its strong wealth management growth and excess capital position. Q: What changes were made to OCBC's rating and target price? A: OCBC was upgraded from Neutral to ACCUMULATE with the target price raised from S$17.00 to S$20.00, reflecting a higher terminal growth rate of 3% and lower beta of 1.1. Q: How are deposit trends affecting Singapore banks? A: CASA balances rose 13% year-on-year, but the CASA ratio to deposits dipped slightly to 19.4%, which serves as a tailwind by lowering funding costs for banks. Q: What is expected for bank earnings in FY25? A: Earnings are expected to decline in FY25 due to lower net interest income from compressed margins, though deposit rate cuts may help ease this pressure in the second half of 2025. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.

Before the Year Ends: Key Financial Steps for a Confident 2026

Published on Dec 16, 2025 58

As 2025 draws to a close, many of us naturally begin to reflect on the year thus far. Our milestones, the challenges we faced, and whether we achieved our set goals. Apart from that, this period is also a perfect time to take stock of our financial health. While taking a financial inventory may sound daunting, it does not have to be complicated. Think of it as a simple checklist or review that helps set the tone for a more confident 2026. 1. Review Your Policies & Protection Needs With the upcoming changes to Integrated Shield Plan (IP) riders, which were announced on 27 Nov 25, you may face higher out-of-pocket medical expenses in the future1. This is because new riders will no longer be able to cover the minimum deductible (the initial amount you must pay before insurance kicks in). While the cost of new riders is expected to decrease, these changes make it a good time to review your policies and make sure your needs are adequately met. Healthcare is, unfortunately, one of the largest and most unpredictable financial commitments we face; thus, it helps to start setting aside some funds for emergencies. 2. Strengthen Your Savings Have you taken that first step in opening a higher-interest-bearing account, or are you still keeping most of your funds in a basic savings account? Many banks today offer significantly higher interest rates when you meet certain criteria, like salary crediting into specific account types. This is a simple and low-effort way to let your savings grow a little faster. Beyond that, you may also consider short-term instruments like T-bills or fixed deposits to further strengthen your savings. However, as we are currently in a period of declining interest rates, relying solely on these options may no longer be sufficient. This is a good time to review your holdings and consider diversifying into other alternatives that can offer you more. 3. Do Not Invest On Impulse Gold and equities continue to be a popular choice among investors, but not everyone is comfortable with volatility and the risks that come with it. Nevertheless, they remain valuable instruments when managed effectively, and there are strategies you can use to help mitigate volatility and make your journey smoother. One approach you can consider is Dollar-Cost Averaging (DCA), where you invest a fixed amount at regular intervals, regardless of the market price of an asset. Over time, this helps to cushion the impact of price volatility and, as the name suggests, averages out your entry cost. You can also consider building a diversified and balanced portfolio. While gold is trending at the moment, it is rarely wise to rely too heavily on a single asset. It is much safer to spread your investments rather than putting them all in one basket. Doing so makes your portfolio more resilient to market turbulence. Lastly, always keep yourself anchored by establishing realistic, long-term goals. Consistent and disciplined effort often matters more than timing the market. Avoid chasing trends or investing on impulse. Sustainable growth is cultivated over time; Rome wasn’t built in a day. 4. Attaining Your Retirement Goals A comfortable retirement is something we all hope for, whether you are only beginning to plan for it or you are already approaching that milestone. The year-end is always a perfect moment to pause, reflect, and evaluate your retirement preparedness. You can start by estimating how much monthly income you will realistically need in retirement. From there, assess whether your current and future income streams can sustain that lifestyle. Income streams can come from many avenues, but the most common and reliable ones will typically include: CPF Lifelong Income For the Elderly (CPF LIFE) payouts Dividends from your Investments Retirement / Savings Income Ideally, these income streams would be your perpetual sources, a stable and reliable form of income you have cultivated over the years. Always remember that retirement is not only about how much you save but also about ensuring your savings are structured to last for your entire lifetime. With factors such as rising inflation and healthcare costs, failing to make your income streams resilient is tantamount to risking financial insecurity in retirement. Start Today! Planning and organising your finances is an ongoing process, not a one-time task. A simple year-end review can give you the clarity and renewed motivation you need to step into 2026 with confidence. Whether it’s reviewing your policy coverage, adjusting your savings strategies, or strengthening your investment approach, any small step you take will help you move closer to your dream retirement. You don’t need to tackle everything at once; you just need to start. If you’re unsure where to begin or would like a second opinion on your current plans, we’re always happy to help. Best wishes, and may 2026 bring you clarity, progress, and confidence in your financial journey. Contributor: Claudia Tan Financial Services Director Phillip Securities Pte Ltd (A member of PhillipCapital) https://bit.ly/TTPclaudia References: [1] https://www.moh.gov.sg/newsroom/new-requirements-for-integrated-shield-plan-riders-to-strengthen-sustainability-of-private-health-insurance-and-address-rising-healthcare-costs/ Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.

Federal Reserve Delivers Third Rate Cut Amid Growing Internal Divisions

Published on Dec 16, 2025 20

The Federal Reserve delivered its third consecutive interest rate cut, but the decision revealed significant internal tensions within the committee as monetary policymakers navigate an increasingly complex economic landscape. Rare Three-Way Split Signals Policy Uncertainty The 9-3 vote marked the first triple dissent since 2019, highlighting a widening divide among Fed officials. Governor Stephen Miran advocated a more aggressive 50-basis-point reduction, while Kansas City Fed President Jeffrey Schmid and Chicago Fed President Austan Goolsbee preferred maintaining current rates. This split underscores the challenging macro environment facing the central bank, with committee members holding divergent views on inflation trajectories and labour market risks. Labor Market Concerns Take Center Stage For the first time in this easing cycle, the Federal Open Market Committee explicitly acknowledged rising downside risks to employment. This represents a meaningful shift in the Fed's labour market assessment, as job growth has decelerated throughout the year and unemployment has edged higher. Recent economic indicators point to softer hiring conditions, even as inflation remains somewhat elevated above the Fed's target. Gradual Easing Path Ahead The December Summary of Economic Projections reinforces expectations of a shallow and measured easing cycle. The median federal funds rate is projected at 3.4% in 2026 and 3.1% in 2027, converging toward a longer-run neutral estimate of 3%. Growth expectations for 2026 were revised upward to 2.3% from the previously projected 1.8%. Unemployment is expected to stabilize around 4.4%-4.5%, while inflation is projected to return to the 2% target by 2028. Balance Sheet Policy Transition The Fed officially concluded its quantitative tightening programme, declaring that reserves have reached "ample" levels. Moving forward, the central bank will begin purchasing Treasury bills to maintain adequate reserve levels, marking a shift away from balance-sheet runoff to a neutral reserve-maintenance regime. This operational change aims to stabilise money-markets as non-reserve liabilities continue expanding. Additionally, the Fed also implemented several technical adjustments, lowering the interest rate on reserve balances to 3.65% and establishing new operational parameters for repo operations to support the updated policy stance. Frequently Asked Questions Q: What made this Fed meeting unusual compared to recent decisions? A: The 9-3 vote featured the first triple dissent since 2019, with Governor Stephen Miran favoring a 50bps cut while Kansas City Fed President Jeffrey Schmid and Chicago Fed President Austan Goolsbee preferred no change, highlighting internal disagreement. Q: How has the Fed's view of the labour market changed? A: The Committee placed clearer emphasis on the fact that downside risks to employment have risen, marking a meaningful shift as job gains have slowed, unemployment has edged higher, and hiring conditions have softened. Q: What does the Fed's economic outlook suggest for future rate cuts? A: The December projections signal a "slow glide" path with the median federal funds rate at 3.4% in 2026 and 3.1% in 2027, indicating a shallow and gradual easing cycle rather than aggressive cutting. Q: What changes occurred with the Fed's balance sheet policy? A: The Fed officially ended quantitative tightening, concluding that reserves have reached "ample" levels, and will begin purchasing T-bills to maintain reserve adequacy rather than continuing balance sheet runoff. Q: When does the Fed expect inflation to return to target? A: According to the projections, inflation is expected to return to the 2% target by 2028, while unemployment is projected to remain around 4.4%-4.5%. Q: What operational changes accompanied the rate decision? A: The Fed lowered the interest rate on reserve balances to 3.65%, set overnight repo operations at 3.75% and reverse repos at 3.50%, and will continue rolling maturing securities into short-dated bills. Q: How were growth expectations revised? A: Growth expectations for 2026 were revised upward to 2.3% from the previously projected 1.8% in September, suggesting a more optimistic economic outlook. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.

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