Daily Morning Note – 1 November 2021


China’s economy showed signs of further weakness in October as power shortages and surging commodity prices weighed on manufacturing. The official manufacturing purchasing managers’ index fell to 49.2, the National Bureau of Statistics said, the second month it was below the key 50-mark that signals a contraction in production. The non-manufacturing gauge, which measures activity in the construction and services sectors, dropped to 52.4, well below the consensus forecast. Meanwhile, cracks are beginning to show in China’s policy of stamping out all traces of Covid as soon as it appears. But Beijing remains committed to “Covid-zero,” at least through the Winter Olympics that begin in February. Here’s why China’s Covid crisis could be yet to come.



More travellers from the United States could soon be passing through Changi Airport to other parts of the region following a landmark agreement between Singapore Airlines (SIA) and US carrier United Airlines. The move could also lead to an additional option for Vaccinated Travel Lane flights to Singapore, and in the long term, paving the way for lower fares and more flights between Singapore and US, said experts. SIA had announced the partnership with United Airlines in an internal circular earlier this month. It said the carriers had signed a memorandum of understanding to work on supporting the resumption of connectivity between Singapore and the US.

Even as tighter virus containment measures resurface, Singapore banks’ third-quarter results are likely to reflect benign asset quality, declining credit costs and stable loan growth. Uneven recovery across the region could bump up loan moratoriums in countries such as Malaysia and Indonesia. DBS has booked around S$1.5 billion of general provisions – of which S$800 million was in excess of the minimum requirement set by the Singapore regulator – while OCBC and UOB have general provisions of around S$600 million and S$1.2 billion respectively.

Sembcorp Marine (Sembmarine) will be closely watched this week by analysts and investors like Temasek Holdings’ mandatory conditional general offer at S$0.08 per share closes on Wednesday (Nov 3) at 5.30 pm. While confidence in the beleaguered offshore and marine (O&M) company is very weak, its shares appear to be trading well below their intrinsic value. Provenance Capital – Sembmarine’s independent financial adviser (IFA) – estimates the company’s net asset value (NAV) as of Jun 30 adjusted for its recent rights issue stood at S$0.1437 per share.

SGX-listed Metech International Limited is pleased to announce that its joint venture company, Asian Eco Technology Pte. Ltd. DMT has also established strong working relationships with China’s top scientific research institutions such as Suzhou Institute of Nanotechnology and Nano-Bionics, Chinese Academy of Sciences, Xi’an Jiaotong University. Staffed by several industry experts, comprising professors, researchers and overseas scientists, DMT has built up strong technological capabilities and attained numerous intellectual property rights and patents.

Urban Redevelopment Authority (URA) has turned down an outline application for the proposed redevelopment of International Plaza in Tanjong Pagar under the Central Business District (CBD) Incentive Scheme. The outcome is seen as having implications for the ongoing collective sale tender for the property, which has a S$2.7 billion reserve price; if achieved, this would be the highest for a collective sale. The tender closes on Nov 30. URA unveiled the scheme in 2019 to spur owners of older predominantly office buildings in specific parts of the CBD to redevelop their properties into mixed-use projects. Owners would be allowed to build more gross floor area (GFA) – beyond the plot ratio in Master Plan 2019 or the approved plot ratio, whichever is higher (plot ratio is the ratio of GFA to site area). The idea is to inject a live-in population, liven up the district in the evenings and on weekends and rejuvenate the CBD.


Popular video game site Roblox had begun to restore service Sunday after a two-day outage that left millions of players without access to the online game world over the Halloween weekend.

US biotech firm Moderna said on Sunday that American officials have delayed approving its Covid-19 vaccine for teenagers to allow more time to better assess the potential risk of developing myocarditis, or heart inflammation. The US Food and Drug Administration (FDA) on Friday “informed Moderna that the agency requires additional time to evaluate recent international analyses of the risk of myocarditis after vaccination,” the biotech company said Sunday in a statement. The evaluation on whether to recommend Moderna’s vaccine for 12- to 17-year-olds could last until January 2022, the company said.

Chinese Foreign Minister Wang Yi told the United States not to “betray its promises” on Taiwan at a rare meeting on Sunday with Secretary of State Antony Blinken, as tensions run high over the island. Months of simmering tensions spiked in October after President Joe Biden declared that the United States would defend Taiwan in the event of an attack by Beijing – a statement seemingly at odds with long-held American policy towards the self-ruling island.

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

Sheng Siong Group Ltd – Market share spike

Recommendation: BUY (Upgraded); TP S$1.69, Last close: S$1.42;

Analyst Paul Chew

– 3Q21 revenue and PATMI beat our estimates. 9M21 revenue and PATMI at 85%/91% of forecasts. Gross margins was a record 29%.

– The closure of Jurong Fishery port and Pasir Panjang wholesale centre resulted in a surge in fresh food sales. Cautious consumers in visiting wet markets was another trigger.

– We raised FY21e PATMI by 15% to S$126.9mn. FY21e revenue forecast is lifted 11% and gross margins increased by 0.5% points to 28.3%. Our FY22e forecast is unchanged. The recent spike in cases is accelerating Sheng Siong’s market share in fresh food from wet markets. We believe this is a secular trend. Our target price is unchanged at S$1.69, based 5-year historical average of 25x PE. The target price is based on FY22e earnings, to reflect more normalised earnings as borders re-open. Upgrade to BUY from ACCUMULATE due to recent weakness in share price.

Apple Inc – Supply constraints, but demand strong

Recommendation: BUY (Maintained); TP US$187.00,

Last close: US$149.81; Analyst: Timothy Ang

– Full year revenue and PATMI in line at 100%/101% of our FY21 forecasts.
– Elevated freight costs and component shortages guided for the holiday season.
– Maintain BUY with an unchanged target price of US$187.00. Valuations based on DCF with a WACC of 5.8% and terminal growth of 3%. Demand for iPhone, iPad and Mac remain robust. iPhone 13 pre-orders were 20% above the iPhone 12 launched last year. We are estimating 2.8% iPhone sales growth in FY22e. We see potential near-term upside if Apple succeeds in its appeal to delay the App Store ruling coming into effect on 9 December. The ruling allows users in the US to pay outside the App Store, which could negatively impact revenue by 2% or gross profits by 4%.

Technical analysis: SG Market Outlook

3,200 resistance is impregnable

Analyst: Chua Wei Ren

– Singapore’s stock market rebounded last week. However, majority of the counters are facing tough resistance.

– The FTSE Straits Times Index rebounded and tested 3,200 psychological resistances but fails to break. Weekly chart shows a bearish pin bar which intensify a possible correction.

– Based on the technicals, the major bullish outlook remains intact.

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