Daily Morning Note – 10 September 2021

Dear valued client,

Asian stocks looked set for a steady start Friday as traders weigh the prospect of reduced central bank stimulus as well as challenges to economic reopening from the delta coronavirus variant.

Futures for Japan, Australia and Hong Kong pointed to modest gains. U.S. contracts fluctuated after the S&P 500 posted its longest losing streak since June. Reports showed lower U.S. jobless claims but also more virus disruption, including Microsoft Corp.’s move to scrap plans to fully reopen its offices.

Treasuries climbed amid the mood of caution and strong demand at a 30-year bond auction. The dollar was little changed in early Asian trading. In commodities, oil slid after China decided to tap crude reserves to ease a surge in energy costs. A broad rally in base metals markets gathered pace.

The Nasdaq Golden Dragon China Index edged lower after a bruising tumble in Chinese technology companies in Asia. Beijing’s crackdown on a range of private industries as well as possible steps to cushion the second-largest economy remain in focus for traders.


SG News

Canned food brand Del Monte Pacific Limited posted a net profit of US$18.3 million for the first quarter ended July 31, reversing from a loss of US$3.2 million for the same period a year ago. Revenue rose 11.9 per cent to US$462.1 million, driven by higher sales in the US across almost all major segments, higher exports of S&W fresh pineapples as well as processed pineapples and other products. The group, which is dual listed on the Singapore Exchange and the Philippine Stock Exchange, improved its margins by 600 basis points to 28.9 per cent from better sales of higher-margin branded products in the US and lower costs. Earnings per share was 0.69 US cents, compared with a loss per share of 0.42 US cents previously. No dividends were declared for this quarter and the prior year quarter as the group does not declare dividends based on first quarter and third quarter results.

Singapore Press Holdings (SPH) said on Thursday that winding up the media business may incur “potentially heavy financial costs”, and any sale of the media business would also require regulatory approval. This was in response to questions sent by shareholders on why the board did not consider selling or shutting down the media business, ahead of the extraordinary general meeting (EGM) to be held on September 10. SPH is seeking to get shareholders’ approval on its proposed restructuring and formation of a new constitution. SPH, which publishes The Business Times, had announced in May that it will be transferring its entire media-related business to a company limited by guarantee (CLG). This came as part of a strategic review announced in March amid structural changes that had severely disrupted the traditional business model, which relied on print advertising revenue. With the loss-making media business hived off, Keppel had made a S$2.2 billion bid to privatise SPH’s non-media business. The deal, which values SPH at S$3.4 billion, will take place through a scheme of arrangement, subject to SPH shareholders first approving its media restructuring plan.

E-commerce and gaming company Sea is looking to raise US$6.3 billion in a share and convertible bond sale in South-east Asia’s largest ever capital raising, tapping growing investor interest in the region. This is the second major fund raising in less than a year for the US$185 billion company, which is seeking to scale up its global expansion by testing out possible new markets, and the latest among a slew of deals in South-east Asia. Sea, known for its Shopee e-commerce platform, is looking to sell 11 million American Depository Receipts with the option to offer 1.65 million more as part of a so called greenshoe option, the Singapore-headquartered company said in a regulatory filing on Thursday. It is also raising US$2.5 billion in a convertible bond that has a US$375 million greenshoe attached. At Sea’s closing stock price of US$343.8 in New York on Wednesday, the share sale could raise up to US$3.8 billion.

US News

Applications for US state unemployment benefits fell last week by the most since late June as the labour market continues towards a full recovery. Initial unemployment claims in regular state programmes decreased to 310,000 in the week ended Sept 4, Labor Department data showed on Thursday. The median estimate in a Bloomberg survey of economists called for a slight decrease to 335,000 new applications. Continuing claims for state benefits fell to 2.78 million in the week ended Aug 28. Initial claims have declined steadily as vaccination progress and reopenings have increased demand for workers. Still, claims are higher than pre-pandemic levels, and economists expect economic growth to slow in the third quarter as stimulus spending moderates. The recent surge in Covid-19 infections risks interrupting a steady recovery in the labour market, especially if outbreaks prompt school districts to reconsider in-person schooling.

US lawmakers launched discussions Thursday on a US$3.5 trillion spending package crucial to President Joe Biden’s legislative agenda, as several days of debate on its major sections got underway. Five key House committees began “marking up” their respective portions of the bill, with the most fraught issue remaining how to pay for the giant raft of measures. Democrats want to push the package through over the coming weeks using a fast-track process known as reconciliation that allows budget-related legislation to advance through the Senate by simple majority rather than the usual 60 votes. It would include funding for climate measures, new investments in infrastructure, residency status for millions of migrant workers and two years of paid tuition at public universities.

Oil prices fell to a two-week low on Thursday as China rolled out a plan to release state oil reserves, the US weekly crude draw was smaller than expected and US Treasuries rallied as investors sought safer assets. In volatile trade, Brent futures fell US$1.15, or 1.6 per cent, to settle at US$71.45 a barrel. US West Texas Intermediate (WTI) crude fell US$1.16, or 1.7 per cent, to US$68.14. That was the lowest settlement for both since Aug 26. “A tremendous auction in the 30-year bond with the lowest interest rate print since January put a significant scare into the (oil) market in what looks like a flight to safety,” said John Kilduff, partner at Again Capital LLC in New York. After falling over US$1 a barrel early in the session, both benchmarks turned positive following reports that a ship was stuck in the Suez Canal. The ship was refloated and caused no delays.

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

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