Daily Morning Note – 1 March 2022

U.S. equity futures were steady Tuesday and a rally in crude oil paused, bringing a hiatus in volatility as investors evaluated the war in Ukraine and the sweeping sanctions imposed on Russia.

Stocks in the Asia-Pacific made a steady start, pushing higher in Australia, while futures for Japan rose and Hong Kong’s were flat. The S&P 500 index trimmed most of a Monday drop by the close, while a gauge of global shares notched a second straight monthly decline for the first time since 2020.

Treasuries jumped across the curve in the Wall Street session amid risk aversion and month-end rebalancing. The dollar was narrowly mixed against key peers. Oil stabilized as traders mull the possible release of some emergency stockpiles to counter supply fears stemming from the Ukraine war.

Russia’s markets remain under huge pressure after the U.S. and its allies moved to block the Bank of Russia’s access to its foreign reserves and cut some lenders off from the SWIFT messaging system for global banking.

President Vladimir Putin announced countersanctions, while officials also introduced some capital controls to try and stem a ruble plunge. There’s a growing risk that Russia’s stocks and bonds could be kicked out of major global benchmarks as they become increasingly hard to trade.

Stocks to watch: Mapletree Logistics Trust

SG

Singapore’s biggest banks are restricting trade financing for Russian raw materials, as the war in Ukraine spurs lenders in Asia’s largest energy and commodities trading hub to reduce exposure to the sanction-hit country. The limits include a halt on issuing so-called letters of credit in US dollars for trades involving Russian oil and liquefied natural gas, said sources. DBS Group Holdings Ltd, Oversea-Chinese Banking Corp and United Overseas Bank Ltd have stopped issuing letters of credit involving Russian energy deals because of uncertainty over the course of sanctions, said these sources, who spoke on condition of anonymity.

Hong Fok Corporation has reported a profit of S$41.8 million for FY2021 ending Dec 31, a reversal from a loss of S$8.7million a year prior, rising in tandem with revenue. In a filing on Monday evening (Feb 28), the property developer declared a first and final 1-tier exempt dividend of 1 Singapore cent per share. Earnings per share for FY2021 rose from 5.08 Singapore cents to 5.83 Singapore cents. Revenue for FY2021 rose 13 per cent from S$80.4 million to S$90.5 million, driven mainly by sales of more residential units of Concourse Skyline, the last unit of Jewel of Balmoral, higher property management income and dividend income. This was partially offset by lower rental income from YOTEL Singapore Orchard Road and investment properties in Hong Kong.

The manager of Mapletree Logistics Trust (MLT) has announced a proposed acquisition of Baeksa Logistics Centre in South Korea for 88.5 billion won (S$100.3 million). The real estate investment trust (Reit) will expand its presence in South Korea with the acquisition, it said in a bourse filing on Monday evening (Feb 28). The property is located within the established Yongin-Icheon logistics hub that serves the Seoul Metropolitan Area. It is a 4-storey single-block dry logistics facility with a total gross floor area of over 41,100 sq m on 30,000 sq m of freehold land. It has been built with specifications such as strong floor loading of over 20 KiloNewtons per sq m, direct ramp access and spacious docking yards to facilitate logistics operations.

Jardine Cycle & Carriage (J C&C) reported a 22 per cent increase in FY2021 ending Dec 31 earnings from US$540 million to US$661 million, in a filing on Monday (Feb 28). The mainboard-listed investment holding company’s FY2021 revenue grew 34 per cent from US$13.2 billion to US$17.7 billion. The underlying profit for FY2021 jumped 83 per cent from US$429 million to US$786 million. The company has proposed a final dividend of US$0.62 per share, bringing the total dividend to US$0.80 for FY2021, 86 per cent higher than in FY2020. Earnings per share for FY2021 also increased from US$0.61 to US$1.10.

Raffles Education has responded to SGX Regulation Company’s (RegCo) queries and will not be replacing its directors who are currently out on bail. In a filing on Monday (Feb 28), the mainboard-listed education provider said that the resignation of almost the entire board of directors could destabilise the business and operations. Raffles Education’s Nomination Committee (NC) regards the ongoing investigations by the Commercial Affairs Department (CAD) relates to a one-off historical matter, and does not want to pre-empt or prejudge the outcome of the investigations. To recap, 5 of Raffles Education’s directors were notified of their formal arrest and bail conditions of S$30,000 each. Under the bail conditions, the directors have to routinely attend to the CAD office to assist with ongoing investigations and can travel out of Singapore if they have obtained clearance beforehand. None has been formally charged.

Sinarmas Land reported a 44.7 per cent jump in FY2021 earnings to S$145.7 million from S$100.7 million a year prior in a filing on Monday evening (Feb 28). The mainboard-listed property developer’s FY2021 revenue declined 1.7 per cent to S$895 million from S$910.4 million. This decline was due mainly to lower sales of industrial land in Kota Deltamas, but was partially offset by higher revenue recognition for residential units and apartments in Indonesia as an increased number of units were handed over to buyers.

Equipment manufacturing provider UMS FY2021 earnings ended Dec 31 jumped 49 per cent to S$53.1 million, rising in tandem with a record revenue of S$271.2 million, a 65 per cent increase from the year prior. The mainboard-listed company is doubling the final dividend to 2 Singapore cents per share as a reward to shareholders, it said in a regulatory filing on Monday (Feb 28). Earnings per share for FY2021 rose from 5.46 Singapore cents to 7.96 Singapore cents. The growth in revenue was driven mainly by the sustained semiconductor boom propelling sales growth, and the integration of Catalist-listed JEP Holdings in Q2FY2021 ending Jun 30.

Property developer OUE reported FY2021 ending Dec 31 earnings of S$80.9 million, reversing from losses of S$343.4 million a year prior. The mainboard-listed company’s FY2021 revenue declined 43.3 per cent to S$300.8 million from S$530.5 million in FY2020 due mainly to lower contribution from the real estate segment, it said in a filling on Monday (Feb 28) to the Singapore Exchange. OUE is proposing a final tax-exempt dividend of 1 Singapore cent per share, bringing the total cash dividend to 2 Singapore cents per share for FY2021.

US

Coinbase Global jumped by the most in almost 3 months on Monday (Feb 28), reversing last week’s decline that was fuelled by risk-off sentiment and the company’s warning that trading volumes could drop. Shares in the biggest US cryptocurrency exchange climbed as much as 8.7 per cent on Monday to US$192.23 amid a broader bounce in stocks linked to digital currencies. But the stock remains down around 25 per cent this year due to a flight to haven assets amid the buildup to Russia’s war with Ukraine. The stock dropped 6.5 per cent last week as Coinbase said trading volume would probably decline during the first quarter. Monday’s rally, which is lifting the shares more than 10 per cent above their 2022 low reached on Jan 27, arrives amid new speculation that crypto prices have bottomed out and that traders have already priced in the risks facing the firm.

The Pentagon said on Monday it was still studying Russian President Vladimir Putin’s order to mobilise his nuclear forces, and that Belarus troops had not yet joined the conflict in Ukraine. “We’re still monitoring and watching this as closely as we can given President Putin’s announcement yesterday,” a senior US defence official said. “I don’t believe we’ve seen anything specific as a result of the direction that he gave,” the official told reporters. On Sunday, four days after launching the invasion of Ukraine, Putin announced that he had ordered his military chiefs “to put the deterrence forces of the Russian army into a special mode of combat service.”

Oil prices jumped on Monday as Western allies imposed more sanctions on Russia and blocked some Russian banks from a global payments system, which could cause severe disruption to its oil exports. Brent crude settled up US$3.06, or 3.1 per cent, at US$100.99 a barrel after touching a high of US$105.07 in early trade. The Brent contract for April delivery expires on Monday. The most active contract, for May delivery, was up US$3.14 at US$97.26. US West Texas Intermediate (WTI) crude settled up US$4.13, or 4.5 per cent, at US$95.72 after hitting US$99.10 in early trade.

President Joe Biden will play host to a special summit of the United States and leaders of South-east Asian nations on Mar 28 and 29 in Washington, the White House announced on Monday (Feb 28). The White House summit, part of US efforts to step up engagement with a region Washington sees as critical to its efforts to push back against China’s growing power, had been expected earlier in the year, but scheduling was delayed by Covid-19 concerns. White House press secretary Jen Psaki said the summit of the Association of South-east Asian leaders (Asean) will commemorate 45 years of US-Asean relations.

The escalating crisis over Ukraine has upended the cost of shipping oil by sea. Freight rates for hauling crude from Russia are surging as Western sanctions push up the risks of carrying cargoes on those routes, while a scramble for alternative supplies boosts the rates for other passages. Shipowners are offering at least double the last transacted rate to carry so-called ESPO crude from Kozmino, which loads oil from Russia’s Far East, to ports in China, said traders and a shipbroker who asked not to be identified. At the same time, the cost of shipping oil from the US to Ningbo in China’s Zhejiang province in the north-east by supertanker has jumped, as has the rate for Ceyhan, Turkey, to China.

Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR

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