DAILY MORNING NOTE | 10 April 2023

Week 15 equity strategy: The market is likely to trade sideways in the lead-up to the release of US March’s Consumer Price Index (CPI) on Wednesday. The CPI is expected to rise by 5.2% YoY, a decline from February’s reading of 6%. The sharp deterioration in CPI should be driven by falling gasoline prices in the US, which experienced their largest contraction in over 30 months (-19% YoY). The possibility of a tradeable rally around a Fed pivot cannot be ruled out.

In Singapore, the economic data continues to show healthy growth: 1) Tourist arrivals breached 1 million visitors in March, marking the first time in 28 months. 2) Retail sales expanded by 6% in the first two months of the year, far exceeding the pre-pandemic annual growth rate of 0.7%. 3) Property prices jumped 3% QoQ, raising concerns that they may be too hot. In the last two rounds of cooling measures in 2018 and 2021, property prices rose 9.1% and 10.6%, respectively, before government intervention. In the past 12 months, prices have climbed 11.3%, and over two years, up by 20%.

The Singapore bourse’s key gauge gave up its four-day winning streak on Thursday (Apr 6), ahead of market closures in the city-state, as well as in many other markets across the region for Good Friday and the long Easter weekend. Singapore shares fell 18.39 points or 0.6 per cent to 3,300.48. Turnover on the local bourse stood at 1.2 billion units worth S$865.5 million, with 282 counters down and 266 up.

Wall Street stocks finished a quiet session mostly higher on Thursday (Apr 6), concluding a holiday-shortened trading week that has included weakening economic data. Reports earlier in the week showed a softening in the labour market, a contraction in the manufacturing sector and slowing growth in services. The Dow Jones Industrial Average ended flat at 33,485.29. The broad-based S&P 500 gained 0.4 per cent to 4,105.02, while the tech-rich Nasdaq Composite index advanced 0.8 per cent to 12,087.96.

SG

Tembusu Grand, the first new launch in Katong for the year, sold 340 of its 638 units during its launch weekend, City Developments (CDL) and MCL Land said in a joint statement on Sunday (Apr 9). The 340 units, amounting to 53 per cent of the project’s available units, were sold at an average selling price of S$2,465 per square foot (psf). About 90 per cent of the buyers were Singaporeans, while the remaining 10 per cent comprised permanent residents and foreigners from China, Malaysia, the US, and other countries.

Seatown Holdings, indirectly owned by Singapore’s Temasek, is planning to raise about US$1.5 billion for its new Asia-focused private credit fund, people familiar with the matter said. Temasek and its affiliates plan to commit about US$1 billion for SeaTown’s new private credit fund, launched late last year. An additional US$500 million would be raised from external sources, the people said, requesting not to be named because the matter is private. It’s not clear whether the money coming from Temasek and its affiliates would be a fresh allocation to the alternative asset class or capital recycled from SeaTown’s other private credit fund.

Fung Group is exploring an initial public offering in Singapore for its retail brands unit that could value the business at about US$500 million, according to people with knowledge of the matter. The Hong Kong-based consumer goods company is working with a financial adviser on the potential first-time share sale of its unit Branded Lifestyle Asia, the people said, asking not to be identified as the process is private. The Fung Group is seeking to raise more than US$100 million from the IPO of its business housing retail brands in South Korea and Taiwan, in a listing that could take place as early as this year, the people said.

US

Deposits at US commercial banks rose near the end of March for the first time in about a month, showing signs of stabilising after the two largest bank failures since the financial crisis rocked the banking system and rattled depositors. Federal Reserve data released on Friday showed deposits at all commercial banks rose to US$17.35 trillion in the week ended March 29, on a non-seasonally adjusted basis, from a downwardly revised US$17.31 trillion a week earlier. It was the first increase since the start of March and marked an end, for the moment, to a record flight of deposits triggered by the collapses of Silicon Valley Bank and Signature Bank toward the middle of last month.

Tesla has slashed prices of its electric vehicles in the United States, its website showed on Thursday (Apr 6), doubling down on a discount drive against the backdrop of a weakening economy. The cuts ranged from 1.9 per cent on the performance version of the Model 3 to 5.6 per cent on the basic version of the Model S. Tesla did not immediately respond to a request for comment on the reductions. The move follows repeated comments in recent months by chief executive Elon Musk that Tesla would focus on lowering prices to spur demand and had seen success in sparking orders with global discounts introduced in January.

Walmart plans to have its own network of electric vehicle (EV) charging stations by 2030 to tap into the growing adoption of EVs in the United States. The new fast-charging stations will be placed at thousands of Walmart and Sam’s Club stores, alongside nearly 1,300 it already offers as part of a deal with Volkswagen unit Electrify America, one of the country’s largest open public EV networks. Walmart’s more than 5,000 stores and Sam’s Club warehouses are located within 10 miles of about 90 per cent of Americans.

Nonfarm payrolls growth in March was about in line with expectations, but showed signs that the jobs picture is in the early stages of a slowdown. The Labor Department reported Friday that payrolls grew by 236,000 for the month, compared to the Dow Jones estimate for 238,000 and below the upwardly revised 326,000 in February. The unemployment rate ticked lower to 3.5%, against expectations that it would hold at 3.6%, with the decrease coming as labor force participation increased to its highest level since before the Covid pandemic.

The US dollar strengthened on Friday (Apr 7) after data showed an increase in jobs in the world’s largest economy last month, suggesting that the Federal Reserve may have to raise interest rates next month. In mid-morning trading, the US dollar index rose 0.2 per cent to 102.05. Against the yen, the US dollar was up 0.3 per cent at 132.075 yen while the euro was 0.2 per cent weaker at US$1.0905.

Oil prices were little changed on Thursday (Apr 6) but posted a third weekly gain as markets weighed further production cuts targeted by Opec+ and falling US oil inventories against fears about the global economic outlook. Brent crude settled up 13 US cents, or 0.2 per cent, at US$85.12 a barrel. West Texas Intermediate US crude closed 9 US cents, or 0.1 per cent, higher at US$80.70.

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

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