DAILY MORNING NOTE | 10 August 2022

The Straits Times Index (STI) ended Monday (Aug 8) down 0.4 per cent or 11.9 points to 3,270.98, amid a mixed regional showing. This comes after a strong US jobs data sent chills across global markets, stoking fears that another Fed rate hike may be in the works to combat inflation. Losers slightly outpaced gainers 229 to 222 in the broader Singapore market, with 1.05 billion securities worth S$941.5 million changing hands. Sembcorp Industries was the top gainer among index constituents, up 3.6 per cent or S$0.11 to S$3.18 at the closing bell. Wilmar International was at the bottom of the table, ending down 4.9 per cent or US$0.21 at US$4.09. The trio of local banks ended mixed. OCBC closed up 0.3 per cent or S$0.04 at S$12.28, DBS ended down 0.2 per cent or S$0.07 at S$32.77, while UOB lost 2.2 per cent or S$0.61 to close at S$27.20.

With all eyes on back-to-back inflation data coming this week, Wall Street stocks tumbled again on Tuesday as earnings warnings tanked tech shares. Investors may have been taking advantage of a recent upswing in share prices to cash out before the government reports on July consumer prices on Wednesday, followed by producer prices on Thursday. While the data are expected to show monthly inflation slowing from June, the annual pace is likely to remain near 40-year highs. The three major indices opened in the red and remained there throughout the trading session. The tech-rich Nasdaq Composite Index lost 1.2 per cent to finish at 12,493.93, pulled down after Micron Technologies became the second big chipmaker to warn of downbeat revenue due to ongoing global supply snarls, following a similar caution by Nvidia on Monday.

SG

Resorts operator Banyan Tree Group on Tuesday (Aug 9) posted a S$514,000 net profit for H1 ended June, reversing the year-ago S$42.6 million loss, as the rising tide of travel lifted all its business segments. H1 revenue more than doubled to S$118.6 million, with the hotel investments segment seeing a S$38.3 million rise in revenue to S$60.8 million as international borders reopened. Revenue for the group’s hotels in the Maldives rose by S$8.7 million from the previous year. In the fee-based segment, revenue was S$4.8 million higher due to strong performance from Banyan Tree’s managed hotels in Mexico, as well as hotel recovery in Asia. But China is an exception, as the government’s sporadic lockdowns have hit business operations, the company said in its earnings. In the next 12 months, Banyan Tree expects to open 14 new hotels and rebrand 2 hotels through conversion. Over the next 3 years, 50 new hotels are expected to open, in line with the company’s ambition to double its operating footprint.

Frasers Property has achieved pre-sold revenue of S$2.3 billion so far in FY2022 for its residential projects across Singapore, Australia, China and Thailand, the real estate group said on Monday (Aug 8) in a business update for the third quarter ended June. In Singapore, the group said the demand for quality residential developments remains resilient, with sales of launched projects strengthening despite property cooling measures introduced in December 2021. For the first 9 months of FY2022, it has sold 286 units in Singapore, with unrecognised revenue amounting to S$0.7 billion as at end June. In Australia, the group said it continued to see active management of sales and settlements amid the rising interest rate and high inflationary environment. Frasers Property in December also secured a 2.5 million square foot (sq ft) site in Queensland, which is expected to yield some 2,150 lots, as part of its strategic land banking efforts to support its development pipeline. The group added that residential properties in Thailand “remain in demand” while residential demand in China continues to stay “robust”. Meanwhile, it said its investment property portfolio is poised for recovery, with continued strong leasing activity in the industrial and logistics sector in Australia, Europe and Thailand. As borders reopen, the group said it has also increased its presence in key locations and stepped-up marketing and cross-selling activities to tap pent-up corporate stay and travel demand for its hospitality portfolio.

US

Pfizer has agreed to buy Global Blood Therapeutics, the maker of a drug for sickle-cell disease, in a deal worth US$5.4 billion. The New York drug giant will pay US$68.50 for all outstanding shares of Global Blood, the companies said on Monday (Aug 8) in a statement before US markets opened. That’s double the price of the stock on Aug 3, when Bloomberg reported the company was drawing takeover interest. Both boards unanimously approved the transaction. Pfizer will gain Oxbryta, South San Francisco, California-based Global Blood’s therapy for sickle-cell disease that sold about US$195 million last year and the companies see as a potential blockbuster. Pfizer needs new products as concerns about the pandemic wane, threatening revenue from its top-selling Covid-19 vaccine and its pill to treat the disease, Paxlovid. Global Blood shares rose 4 per cent in trading before US markets opened, while Pfizer’s were little changed. The Wall Street Journal reported the news earlier on Monday.

Qualcomm and GlobalFoundries signed an agreement on Monday (Aug 8) to more than double their existing long-term manufacturing agreement for chips used in 5G transceivers, Wi-Fi, automotive and Internet of Things (IoT) connectivity. Under a multi-billion dollar revenue agreement, the chips will be produced in GlobalFoundries’ factories in the United States, Germany, Singapore and France. The companies committed to support US-based manufacturing by expanding capacity at GlobalFoundries’ most advanced semiconductor manufacturing facility, in Malta, New York. US chipmaker Qualcomm was one of GlobalFoundries’ first customers to sign a long-term agreement in 2021 to cover multiple geographies and technologies. GlobalFoundries chief executive Thomas Caulfield said in a statement that having Qualcomm as a long-term customer of its upstate New York factory through 2028 would help, along with federal and state funding, to expand the company’s US manufacturing footprint. The US Senate last month passed sweeping legislation to subsidise the domestic semiconductor industry, providing about US$52 billion in government subsidies for semiconductor production and an investment tax credit for chip plants estimated to be worth $24 billion.

At an annual meeting last Thursday (Aug 4), Tesla shareholders greenlit a 3-for-1 stock split that is poised to take place on Aug 24. Essentially, shareholders will get 2 additional shares for every share of Tesla they hold on the Aug 17 record date, while trading on a split-adjusted basis will start from Aug 25. Since the electric-vehicle (EV) maker first mooted the idea of a stock split in March, the counter has outperformed the Nasdaq, surging roughly 50 per cent from a 52-week low of around US$620 in May to close at above US$925 on Aug 4. The rally came on the back of better-than-expected Q2 earnings, as well as a US$430 billion bill in the United States that is expected to deliver – among other things – EV tax credits. Tesla closed 6.6 per cent lower at US$865 on Friday (Aug 5), however, partly due to some profit-taking on the news of the confirmed share split. The counter is also below its 52-week high of over US$1,240 per share, which at the time saw its market capitalisation crossing into the trillion-dollar territory. Assuming a US$900 price, Tesla would ease to around US$300 per share after the stock split. While it doesn’t change the firm’s fundamentals, the split does increase trading liquidity and bring it more comfortably within the reach of employees and retail investors – and Tesla has certainly proved popular with retail investors in particular. The latest share split follows some 2 years after a 5-for-1 stock split in August 2020, which at the time prompted a sharp 60 per cent jump in the counter between the day it was first announced and the day it took effect.

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

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