Daily Morning Note – 10 January 2022
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PHILLIP SUMMARY
Stocks are set to start the week cautiously as investors brace for bond-market volatility and assess the economic hit from the rapidly spreading Covid omicron variant.
Treasury yields climbed across the board last week in a selloff sparked by Federal Reserve minutes signaling a willingness to start hiking rates as soon as March. The yield on the U.S. 10-year note touched the highest level in nearly two years. Cash Treasuries won’t trade in Asia because of the Japan holiday.
U.S. inflation data this week will be keenly watched as concerns grow the Fed is behind the curve in tackling elevated price pressures. U.S. employers added fewer staff than expected in December, but wages rose more than forecast, boosting the Fed’s case to tighten liquidity.
BREAKING NEWS
SG
SPH Reit recorded an occupancy rate of 98.8 per cent as at end-November, its manager disclosed in a quarterly update on Friday (Jan 7). This marks an improvement from its 97.9 per cent occupancy rate a year ago. The real estate investment trust (Reit) will be issuing notice of its books closure date and distribution payment date of its Q1 distribution only after the auditor and financial adviser’s report is completed. This is because of the possible chain offer for SPH Reit, as part of the takeover battle for SPH. Alongside healthy occupancy, SPH Reit’s weighted average lease expiry (WALE) is stable at a 5.5 years by net lettable area. Its strategically located assets with “captive catchments” cushioned the impact of Covid-19, the Reit manager said.
Wealth management platform iFast Corporation is looking to acquire an 85 per cent stake in BFC Bank for a total investment amount of £40 million (S$73.4 million). In a call with reporters and analysts on Friday (Jan 7), iFast’s chief executive Lim Chung Chun said that this acquisition – which will add a digital bank to the company’s fintech ecosystem – will help the group meet its target of assets under administration (AUA) of S$100 billion earlier than the targeted 2028. “A digital bank will enhance our overall ecosystem, and will allow us to grow faster as a wealth measurement platform because part of the services will become a lot easier for us, going forward,” said Lim, adding that iFast is also expecting to grow its customer base more quickly.
Blank-cheque companies are set to make a debut in Singapore this month as the financial hub, which has struggled to attract new stock listings, gears up for competition from Hong Kong. Vertex Technology Acquisition Corporation, sponsored by state investor Temasek’s Vertex Venture Holdings, is seeking at least S$170 million, while Tikehau Capital SCA-backed Pegasus Asia could raise at least S$150 million. The listings are slated for Jan 21 and Jan 25, respectively. The special purpose acquisition companies, or SPACs, come under a framework introduced by Singapore’s exchange in September as bourses globally compete to attract such listings even at a time of growing regulatory scrutiny. Hong Kong released its rulebook last month.
In 2021, the benchmark iEdge S-Reit Index generated 6.2 per cent total returns and the S-Reit and property trusts sector as a whole received S$1.4 billion of net retail inflows while institutional investors have seen net outflows of S$1.0 billion. Throughout the year, 24 S-Reits announced asset acquisitions valued at more than S$15.3 billion and exceeding S$12.7 billion in total purchase price consideration. Mapletree Logistics Trust , Ascott Residence Trust and Ascendas India Trust were the most active S-Reits in terms of asset acquisitions last year, totalling purchase consideration of more than S$2.2 billion, S$780 million and S$400 million respectively.
A merger of the Cathay Cineplexes and Golden Village cinema businesses appears to be off the cards. In a bourse filing on Friday, Cathay owner mm2 Asia said that the long-stop date of the agreement for the potential deal lapsed on Dec 31. The update comes days after mm2 announced that its planned sale of the cinema business to local investment firm Kingsmead Properties had fallen through, due to uncertainty over the Omicron variant. Kingsmead will instead exchange its S$6 million deposit for 75 million new mm2 shares. Prior to the Kingsmead deal, back in December 2020, mm2 announced that it had entered into a heads of agreement with Golden Village’s Orange Sky Golden Harvest Entertainment (Holdings) for a possible merger.
US
The bond market could again set the course for the week ahead, after rapidly rising interest rates gave stocks a choppy start to the new year. In the coming week, key inflation reports are expected, and Federal Reserve Chairman Jerome Powell is slated to testify Tuesday at his nomination hearing before a Senate panel, while the hearing on Fed Governor Lael Brainard’s nomination to the post of vice chair is set for Thursday. The week also marks the start of the fourth-quarter earnings period with reports from major banks JPMorgan Chase, Citigroup and Wells Fargo on Friday.
On Friday, Tesla CEO Elon Musk announced on Twitter that the company will raise the price of its premium driver assistance package, marketed as Full Self-Driving or FSD, from $10,000 to $12,000 on January 17, for customers in the U.S. only. In a series of posts on Twitter, where he has 69.2 million followers, Musk wrote, “Tesla FSD price rising to $12k on Jan 17. Just in the US. FSD price will rise as we get closer to FSD production code release.” When a follower asked him about Tesla’s FSD subscription product (which currently costs $199 per month for most customers) Musk noted, “Monthly subscription price will rise when FSD goes to wide release.” He also teased a new release of FSD Beta, an invitation-only program which offers more advanced features to select drivers who meet Tesla’s qualifications.
Citigroup will be the first major Wall Street institution to enforce a vaccine mandate by terminating noncompliant workers by the end of this month. The bank reminded employees in a memo sent Friday about its policy, first disclosed in October, that they must be “fully vaccinated as a condition of employment.” At the time, the bank said that employees had to submit proof of vaccination by Jan. 14. Those who haven’t complied by next week will be put on unpaid leave, with their last day of employment being Jan. 31, according to the memo, which was first reported by Bloomberg. A spokeswoman for the New York-based bank declined to comment.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
Singapore Banking Monthly – Interest rates show slight uptick
Recommendation: Overweight (Maintained)
Analyst: Glenn Thum
– December’s 3M-SOR up MoM, 3M-SIBOR remains flat.
– Hong Kong’s domestic loans growth increased 4.23% YoY in November. Malaysia’s domestic loans growth increased 4.3% YoY and rose 0.85% MoM in November.
– SGX’s 2H21 top five equity index futures turnover are up 3.5% YoY. SGX securities and derivatives volumes from July to November 2021 are down 4.4% and 1.6% YoY respectively. SGX will be releasing 1HDec22 results on 4 February 2022.
– Maintain OVERWEIGHT. We remain positive on banks. Bank dividend yields are attractive with upside surprise due to excess capital ratios. Improving economic conditions and rising interest rates remain tailwinds for the banking sector. SGX is another beneficiary of higher interest rates.
FAANGM Monthly Dec 21 – Apple & Meta shine during the month
Recommendation : OVERWEIGHT
– FAANGM lagged the S&P 500 in December, returning 3.1% vs 5.6% respectively.
– Outpeformers were Apple and Meta, gaining 7.8% and 8.3%.
– We are OVERWEIGHT on FAANGM as secular tailwinds are intact. Our preference is Amazon as pressure on its share price from supply chain constraints lifts. We are cautious of regulatory headwinds, and we think Meta is facing more uncertainty.
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Daily Morning Note – December 13, 2021
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