Daily Morning Note – 1 November 2018

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YOUR PHILLIP SUMMARY

U.S. stocks rallied for a second day to close out one of the worst months of the bull market on an upbeat note. The dollar added to a 16-month high and Treasury yields jumped. The S&P 500 Index capped its biggest two-day surge since February, paring its biggest monthly decline since 2011 to 7 percent. The Nasdaq 100 Index jumped 2.3 percent, but still fell the most in any month during the bull market. Megacap tech shares that bore the brunt of October’s rout paced the Wednesday rebound, with Netflix and EBay surging more than 5 percent. The FANG cohort rallied after Facebook’s earnings topped expectations. Evercore ISI sees conditions ripe for U.S. stock valuations to rise, while Societe Generale cut its equity allocation, saying the S&P 500 might fall below 2,500.

China’s leadership signaled that further stimulus measures are being planned, as disappointing economic data showed that the current piecemeal approach isn’t working. The nation’s economic situation is changing, downward pressure is increasing, and the government needs to take timely steps to counter this, according to a statement from a Politburo meeting Wednesday chaired by President Xi Jinping. The signal of increasing urgency came just hours after purchasing manager reports showed an across-the-board deterioration that risks spilling into a broader drag on global growth. The world’s second largest economy is being damaged by its trade war with the U.S. and a domestic debt cleanup.

RESEARCH REPORTS

Singapore Banking Monthly – Loans Modestly Weaker And Bulking Up On Deposits

Recommendation: Buy (Maintained), Analyst: Tin Min Ying

– Domestic loans rose 4.5% YoY, driven by business loans growth of 5.3% YoY.

– Domestic deposits rose 2.4% YoY, fuelled by fixed deposit expansion of 6.8%
YoY.

– Hong Kong’s loans growth continues to decelerate to 7.2% YoY in September,
the slowest in almost two years.

– 3-month SIBOR maintained last month’s decade-high of 1.64%.

– Maintain BUY for the Singapore Banking Sector.

BREAKING NEWS

OCBC earnings up 12% to S$1.2b in Q3
OCBC Bank turned a record net profit of S$1.25 billion for its third fiscal quarter in 2018, rising 12per cent from the S$1.11 billion last year for the same period.

Shares in the automaker General Motors surged on Wednesday after it reported better than expected third-quarter revenues and earnings thanks to strong sales of trucks in the US and Cadillacs in China. The company has also eased back on price discounts for US buyers. GM will offer voluntary buyouts to as many as 18,000 salaried employees in North America, as it offsets falling car sales with cost cuts and a shift to selling more expensive vehicles. Ford is also expected to make deep job cuts as part of its $11bn restructuring programme.

General Electric has warned that it might have to put more capital into its financial services division than it had previously suggested, reminding investors that what was once a growth engine for the company has become a drag on its performance.

AEM stocks up 6% to S$0.80 on positive Q3 earnings
Shares in mainboard-listed AEM Holdings have advanced by 6per cent during Wednesday’s trading session, with the tech solutions provider’s stock advancing S$0.045 to S$0.80 as at 4.40pm.

Outlook sours in key sectors; economist warn of 2019 slowdown
Firms here are gloomier about the business outlook for the six months to next March, according to official quarterly polls out on Wednesday. Sentiment has worsened in both the manufacturing and services sectors, and economy watchers said the trend could point to a slowdown next year.

Broad weakness seen in business loans in September as MAS a data shows 0.2% dip
Lending to several business segments slipped, or remained, in negative territory in September from a month ago, contracting overall bank lending for the month.

Cromwell European Reit to but 23 in Europe for €384.4 million (S$604.98 million), and will seek to raise 224.1 million euros through a rights issue to partially fund the acquisition.

Source: SGX Masnet, Bloomberg, Reuters, The Business Times, Channel NewsAsia, Phillip Securities Research

Clients of Phillip Securities can keep updated with Country Strategy and Singapore Sector Reports by logging into: www.poems.com.sg > STOCKS > Research

Read the research report(s), available through the link(s) above, for complete information including important disclosures

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