Top traded counters in May 2023 June 26, 2023

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At a glance:

• G7 imposed additional sanctions on Russia
• FOMC did a 25 BP hike and turned less hawkish
• Democratic and Republican negotiators reached a consensus on the debt issue
• Nvidia hit reached US$1 trillion market capitalisation

Tech heavy NASDAQ gained the most out of the 3 major indices with Dow Jones losing ground.

Amidst the ongoing Russia-Ukraine war, the G7 leaders have expressed their commitment to imposing additional sanctions on Russia¹. The primary objective behind these sanctions is to impede Russia’s ability to sustain the war by cutting off its access to G7 technology, industrial equipment, and services. One of the recent sanctions targeted Russian diamonds, and commodities such as aluminium, copper, and nickel that are produced or processed in Russia. The implementation of these sanctions may result in restricted trading of the commodities, potentially driving prices up.

However, it is worth noting that the effectiveness of these sanctions may be limited, as Russia continues to engage in unrestricted trade with China and India.

During the latest Federal Open Market Committee, or FOMC meeting, the committee implemented its 10th rate hike². The recent hike amounted to a 25 basis point increase, taking the overnight interest rate to a range of 5.00% to 5.25%, its highest in 16 years. Federal Reserve Chair, Jerome Powell, noted that inflation has begun to recede and economic growth is slowing.

In contrast to the previous meeting, the committee decided to abandon the guidance provided at that time, which suggested that “some additional policy firming may be appropriate” to address inflation concerns. In the most recent meeting, the central bank emphasised the need to consider the effects of previous rate hikes, acknowledging that they would take time to impact the economy. These factors will be taken into account when determining the potential need for further hikes. This represents a less hawkish stance as compared to the previous meeting.

Following the FOMC meeting, market participants grew concerned about the possibility of the US government defaulting on its debt after Treasury Secretary Janet Yellen projected that the treasury would exhaust its cash reserves by 5 June 2023³. The consequences of the US defaulting on its debt can be severe and far-reaching. With the US as a major player in the global economy, the US defaulting could disrupt international trade, financial flows and investment activities that could lead to a global economic slowdown. Furthermore, those who hold US debt may encounter significant losses.

US President Joe Biden engaged in several meetings with House Speaker Kevin McCarthy to address the issue of raising the debt limit⁴. However, reaching an agreement proved challenging due to divergent views of the two parties.
The Republicans advocated raising the debt limit contingent upon a reduction in government spending. The democrats on the other hand, were opposed to spending cuts and did not support linking them with the potential increase in debt limit.

Finally, on the night of 28 May 2023, Democratic and Republican negotiators reached a consensus on the debt issue⁵. The next step involved seeking approval from the Congress. Once it has been approved, the Fedwould be able to continue borrowing until the next Presidential election that is scheduled for November 2024. The agreement did not raise the debt ceiling, but instead suspended it till 2025. Without a debt ceiling, the government can make its payments with certainty, without worries about how to fund the upcoming Presidential election. However, despite the suspension of the debt ceiling, there will still be spending caps in place for all areas, except defense.

Against these backdrops, here are some ETFs for your consideration:

abrdn Physical Gold Shares ETF (NYSE-ARCA: SGOL.US)

SGOL is an ETF that seeks to reflect the performance of the price of the gold bullion, less the Trust’s expenses⁶. The ETF is backed by physical gold bullion bars stored in vaults in London, UK and Zurich, Switzerland. SGOL commenced on 9 Sept 2009 with an expense ratio of 0.17%. SGOL’s 10 year performance as of 31 March 2023 is 1.83%.

SGOL opened at US$19.17 and dropped 1.98% to close at US$18.79 in May 2023.

Technical analysis

Status: Neutral

Support: 18.00 – 18.10

Resistance: 19.00

Range-bound

SPDR® Gold MiniShares® Trust ETF (NYSE-ARCA: GLDM.US)

GLDM is an ETF that seeks to reflect the performance of the price of gold bullion, less GLDM’s expenses⁷. The gold custodian is with ICBC Standard Bank Plc. GLDM commenced on 25 June 2018 with an expense ratio of 0.10%. GLDM’s 3 year performance as of 31 March 2023 is 7.55%.

GLDM opened at US$39.75 and fell 2.01% to close at US$38.95 in May 2023.

Technical analysis

Status: Neutral

Support: 37.40 – 37.60

Resistance: 39.40 – 39.50

Range-bound

Here are some popular US stocks – not ranked in any order – traded by POEMS customers in the month of May 2023.

NVIDIA Corporation (NASDAQ: NVDA)

NVDA reported stellar earnings in May. EPS and revenue of US$1.09 and US$7.19 billion, both beat estimates of US$0.92 and US$6.52 billion respectively. NVDA data center group reported US$4.28 billion in sales, versus expectations of US$3.9 billion, a 14% annual increase. The better than expected sales were largely driven by demand for its GPU chips from cloud vendors as well as large consumer internet companies to train and deploy generative AI applications like OpenAI’s ChatGPT.

For the next quarter, the firm expects sales of about US$11 billion, plus or minus 2%, more than 50% higher than Wall Street estimates of US$7.15 billion.⁸ Later in the month, NVDA reported hitting US$1 trillion in market value due to the booming AI demand.⁹ In May, NVDA opened at US$278.40 and gained 35.90% to close at US$378.34.

Referring to the Phillip Research report dated 29 May 2023, the recommendation for NVDA is to Accumulate.

Technical analysis

Status: Bullish

Support: 330.00 – 335.00

Resistance: 400.00

The bullishness is slowing down, and the price is looking for proper support after the bullish gap up.

Apple Inc (NASDAQ: AAPL)

AAPL reported earnings that beat estimates in May 2023. The EPS of US$1.52 exceeded estimates of US$1.43. Revenue was reported at US$94.84 billion, higher than estimates of US$92.96 billion. The better-than-expected results were largely contributed by iPhone sales, reported iPhone revenue was US$51.33 billion, higher than estimates of US$48.84 billion.

The firm did not provide any formal guidance but expects the following quarter revenue performance to be similar to the reported quarter; provided the macroeconomic outlook does not worsen. The firm’s board authorised US$90 billion in share repurchases and raised its dividend by 4% to US$0.24 per share.¹⁰ In April 2023, AAPL opened at US$169.28 and gained 5.33% to close at US$177.25.

Referring to the Phillip Research report dated 8 May 2023, the recommendation for AAPL is to Accumulate.

Technical analysis

Status: Neutral

Support: 170.00

Resistance: 180.00 – 185.00

The bullishness is slowing down, hence we advise investors to wait for the price to sustain above 170.00.

Paypal Holding Inc (NASDAQ:PYPL)

PYPL reported earnings that beat estimates in May. The EPS was reported at US$1.17, beating the estimate of US$1.10. Revenue of US$7.04 billion was also higher than the estimated US$6.98 billion.¹¹

The firm highlighted its push towards Artificial Intelligence (AI) in a call with analysts, as it expects new advances in generative AI to help accelerate its productivity initiatives and enable them to lower its future cost of production.

The firm lowered its outlook for the annual adjusted operating margin, from 1.25% to 1%. ¹²The firm expects an EPS of US$1.15 -1.17 for the next quarter versus analyst consensus of US$1.17. For the whole financial year, the firm expects EPS of US$4.95 versus the analyst consensus of US$4.88.¹³

In May 2023, PYPL opened at US$76.03 and dropped 18.47% to close at US$61.99.

Referring to this Phillip Research report dated 11 May 2023, the recommendation for PYPL is a Buy.

Technical analysis

Status: Neutral

Support: 57.50 – 58.00

Resistance: 64.45 – 64.80

The mood is bearish, but a range should be starting at this minor area.

Airbnb Inc (NASDAQ: ABNB)

ABNB reported earnings in May. The EPS of US$0.18 beats estimates of US$0.09. Its revenue of US$1.82 billion was also higher than estimates of US$1.79 billion. Total revenue rose 20% year over year. Airbnb swung to a net profit of US$117 million, from a net loss of US$19 million in the year-earlier period. The figure marks the first time Airbnb has been profitable during its first quarter on a GAAP basis.

Despite a strong start, the firm warned that the next quarter comparisons would be tough; the Nights and Experiences booked will have unfavourable year-over-year comparisons in Q2 2023 as they overlap pent-up 2022 demand following the COVID-19 pandemic. The firm’s forecast for the next quarter’s revenue to be between US$2.35 billion and US$2.45 billion while analysts expect it to be US$2.42 billion.¹⁴

In May, ABNB opened at US$119.26 and dropped 7.96% to close at US$109.77.

Referring to the Phillip Research report dated 17 May 2023, the recommendation for ABNB is a Buy.

Technical analysis

Status: Neutral

Support: 103.50 – 104.00

Resistance: 115.60

Range-bound

Block Inc (NYSE: SQ)

SQ topped estimates in May. The EPS and revenue of US$0.40 and US$4.99 billion both beat estimates of US$0.35 and US$4.6 billion, respectively.¹⁵

The reported EPS and revenue were up 122% and 26% respectively from a year ago. The better-than-estimated earnings were driven by strong momentum across the Cash App ecosystem, which contributed US$3.27 billion to net revenues for the reported quarter, up 33% year over year.¹⁶

For the full year, the firm raised its profit target to US$1.36 billion on adjusted EBITDA, more than 35% growth year-over-year. ¹⁷In May, SQ opened at US$60.69 and dropped 0.49% and closed at US$60.39.

Referring to the Phillip Research report dated 9 May 2023, the recommendation for SQ is a Buy.

Technical analysis

Status: Neutral

Support: 51.50 – 55.50

Resistance: 70.30

Range-bound

CONCLUSION

With the approval of the debt ceiling bill, one major uncertainty has been eliminated from the market. The economy appears to be resilient, as indicated by the performance of the companies discussed above. Interest in the AI industry has been booming amongst market participants, as evidenced by NVDA’s positive chip demand forecast, which propelled the company into the trillion-dollar club.

Looking ahead, the probability of an announcement for a rate hike in the next FOMC meeting seems low¹⁸. The committee has already implemented 10 consecutive interest rate increases, and may require additional time to assess the state of the US economy following this series of hikes. However, it is important to note that skipping a rate hike may not necessarily indicate a pause, as further increases may be deemed necessary if inflation remains above the target level.

Bloomberg analysts’ recommendations

The table below shows the consensus and average ratings of all analysts updated on Bloomberg in the last 12 months. Consensus ratings have been computed by standardising analysts’ ratings from a scale of 1 (Strong Sell) to 5 (Strong Buy). The table also shows a number of analysts’ recommendations to buy, hold or sell the stocks, as well as their average target prices.

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