DAILY MORNING NOTE | 11 March 2024

Trades Initiated in the past week


Week 11 Equity Strategy: Several US macro data points released last week point to an increasingly resilient US economy. The ISM Services PMI fell to 52.6 in Feb 24, topping forecasts of 53, with Service prices also dropping to 58.6 (Jan 24: 64). The US economy also added 275K jobs in Feb 24, beating forecasts of 200K, with most of the gains occurring in healthcare (67K), and government (52K). The unemployment rate rose 0.2% to 3.9%.

The key highlight of the week was Fed Chair Powell’s testimony during a Senate banking committee hearing. Powell reiterated the Fed’s previous stance on waiting for more inflation data before loosening some of its restrictive policies, although adding that the Fed was “not far” from gaining enough confidence to begin cutting interest rates – reaffirming current market expectations of a first rate cut in Jun 24. The US 10 Year treasury bond fell 120bps for the week. Given the current trajectory of expected rate cuts, we still see significant upside for long-duration bonds (TLT). US Equity markets were much unchanged for the week, although it looks like we could be due for a pullback after a ~10% run YTD. Expect to see some volatility in the coming week with inflation numbers (CPI/Core CPI) being released on 12 Mar 24.

In Singapore, Jan 24 retail sales improved 1.3% YoY vs Dec 23: -0.5%. Most of the gains were driven by motor sales (+37% YoY) as COE prices fell to almost Jan 22 levels due to higher quotas. F&B retailers saw sales rise (+9% YoY) as tourism arrivals continued to recover. The expectation is for F&B establishments and the overall hospitality sector to benefit from this recovery, especially with a strong slate of concerts and events happening in 2024. The Singapore market was basically flat (+0.4%) for the week.

Jonathan Woo
Senior Research Analyst

Singapore shares closed higher on Friday (Mar 8), tracking gains in the region. The index rose 0.4 per cent or 13.31 points to 3,147.09. Across the broader market, gainers outnumbered losers 339 to 226, after 1.5 billion securities worth S$1.1 billion changed hands.

Dow Jones Industrial Average rose 75.65 points or 0.2 per cent to 38,867.00, the S&P 500 lost 16.05 points or 0.3 per cent to 5,141.31, and the Nasdaq Composite lost 115.39 points, or 0.7 per cent, to 16,157.99. The biggest loser among the S&P 500‘s 11 major sectors was technology, down 1 per cent, while the biggest gainer was real estate, up 1.3 per cent.

Top gainers & losers


Events Of The Week



Economists upgraded the first-quarter growth forecast for Singapore’s economy, with some attributing the gains in part to Taylor Swift’s Eras tour concerts. Gross domestic product (GDP) probably expanded 2.9 per cent in the three months ending Mar 31, the quickest pace in six quarters.

Jurong Island Terminal (JIT) handling capacity will be expanded by 2025 to meet growing demand for barge-sailing services from industries based on Jurong Island. The expansion will see the terminal’s annual handling capacity rise to 300,000 twenty-foot equivalent units of containers (TEU), announced port operator PSA Singapore (PSA) in a press release on Friday (Mar 8).

Frasers Centrepoint Trust will be added to the benchmark and Emperador to be removed from it, effective at the start of business next Monday (Mar 18). This brings the total number of Singapore real estate investment trusts (S-Reits) in the indec to seven.

The managers of CapitaLand Ascott Real Estate Investment Trust and CapitaLand Ascott Business Trust said on Friday (Mar 8) that Ascott Reit MTN – a wholly-owned subsidiary of the trustee of CapitaLand Ascott Reit – has issued S$120 million of 3.69 per cent notes due Mar 15, 2029. The notes are issued under its S$2 billion multicurrency debt issuance programme established in September 2009 and amended in July 2020.

City Developments Ltd (CDL) initiated share buybacks for its ordinary shares on the open market on Friday (Mar 8), citing its discounted share value as a reason. The property developer picked up 954,000 ordinary shares, or 0.11 per cent of its issued share capital, at an average price of S$5.75 a share for a total consideration of S$5.5 million. The lowest price that CDL paid on the market was S$5.69, while the most that it forked out was S$5.78.

Sembcorp Industries marked its entry into utility-scale solar development in Indonesia through a joint venture (JV) with a unit linked to PLN, an Indonesian government-owned utilities corporation. The deal involves building and developing a large-scale integrated project with 50 megawatts of solar capabilities and 14 megawatt-hour of battery energy storage in Nusantara, the future capital city of Indonesia.


US job growth accelerated in February, but downward revisions to employment gains in the prior two months and an increase in the unemployment rate to a two-year high of 3.9 per cent suggested that the labour market was slowing. Wage growth also cooled last month, and boosted financial market expectations that the Federal Reserve would start cutting interest rates by June. The labour market is supporting the economy, which is outperforming its global peers.

The United States is weighing sanctions on several Chinese tech companies, including chipmaker ChangXin Memory Technologies, in a bid to further restrain China’s development of advanced semiconductors. Citing people familiar with the matter, it said the commerce department’s bureau of industry and security was considering adding ChangXin to the so-called entity list that restricts access to US technology, along with five more Chinese firms.

Saudi Arabia’s state-owned oil giant Aramco said on Sunday (Mar 10) that it boosted its dividends last year despite net profit falling 24.7 per cent to US$121.3 billion on lower oil prices and volumes. The profit was still the company’s second-highest on record, it said, following a record US$161.1 billion in 2022.

About 600 video game testers at Microsoft’s Activision Blizzard studios have unionised, more than doubling the size of labour’s foothold at the software giant, according to the Communications Workers of America (CWA).

The US Food and Drug Administration approved Novo Nordisk’s weight-loss drug Wegovy on Friday (Mar 8) for lowering the risk of stroke and heart attack in overweight or obese adults who do not have diabetes.

Chinese-founded fast-fashion company Shein is set to face stricter EU online content rules after reporting a huge number of users, joining a group of companies that includes Meta Platforms, Alphabet’s Google, Elon Musk’s X and TikTok.

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


Singapore Banking Monthly – NIM stagnates, fee income recovers

Recommendation: Overweight (Maintained)

Analyst: Glenn Thum

– February’s 3M-SORA was down 5bps MoM to 3.64% and was 10bps lower than the 4Q23 average. The MoM decline is similar to that in January. 3M-HIBOR was down 14bps MoM to 4.68%, smaller than the decline of 55bps in January.

– 4Q23 bank earnings were slightly above expectations. PATMI rose 7% YoY, supported by fee income growth of 21% YoY, while NII growth moderated to ~1%. FY24e guidance is for NII to remain stable YoY as NIMs dip by a few bps and stabilise at around 2-2.25% and loans growth at low-single digit. Fee income is expected to sustain earnings with expectation of double-digit growth in FY24e.

– Singapore domestic loans dipped 1.6% YoY in January, below our estimates. The loan decline was the smallest decline recorded since December 2022. The CASA balance dipped slightly to 18.1% (Dec23: 18.5%).

Maintain OVERWEIGHT. The banks had a mixed February performance. The best performer was DBS, with a 4.7% increase, with UOB the worst, at a 1.4% decline. We remain positive on banks. NIMs may see flat growth despite the higher-for-longer interest rate environment, but a recovery in loan growth and fee income will uplift profits. Bank dividend yields are also attractive, with upside surprises due to excess capital ratios and a push towards higher ROEs.

Magnificent-7 Monthly: Feb 24 – Nvidia leading the way

Recommendation: OVERWEIGHT (Maintained); Analysts: Jonathan Woo, Zane Aw, Helena Wang, Phillip Research Team

– MAG-7 continued its strong start to the year, posting an +8.3% gain in February after strong 4Q23 earnings beat from META, AMZN, and NVDA. The Nasdaq gained +5.2% while the S&P 500 was up +3.6%.

– NVDA (+30.1%) was the biggest gainer again after blowing past its own guidance for the quarter as AI demand remained robust, while AAPL (-2.1%) was the biggest laggard due to continued iPhone weakness.

– AI-related demand remains robust, benefitting semiconductor and consumer internet companies. Demand for tech hardware remains soft due to longer upgrading cycles, while competition in the Chinese EV market continues to intensify. MAG-7’s Forward P/E of 29x remains below its 10-year average of 35x. We maintain an OVERWEIGHT recommendation on the MAG-7 due to higher growth, operating leverage, and earnings upside.

LHN Ltd – Another growth driver emerges

Recommendation: BUY (Maintained); Last Done: S$0.335 TP: S$0.39; Analyst: Paul Chew

– In the 1Q24 update, no financials were provided, but LHN reiterated that the occupancy of their portfolio of assets (industrial, commercial, co-living) is over 90%. The two major projects, 55 Tuas South and GSM Building, are proceeding as scheduled.

– On 25 January, LHN secured two sites to provide accommodation for 700 public sector healthcare professionals (mainly nurses and allied health professionals). Operations will commence in 2H24. We believe LHN’s advantage in securing this project is its operational experience in the co-living sector.

– We maintain our forecast and BUY recommendation. Our target price of S$0.39 is unchanged. We peg our valuations to 6.5x FY24e P/E, while the industry is trading around 13x. Earnings visibility has improved as planned projects are underway and occupancy rates remain vibrant. We view the healthcare accommodation project as a new growth driver. Margins are unclear, but the project is capital light as the authorities provide the premises. Eleven more potential sites may be tendered out.

SEA LTD 4Q23 Update – More E-Commerce Growth Ahead

Recommendation: ACCUMULATE (Downgraded); TP: US$70.00

Analyst: Helena Wang

– Both 4Q23 revenue and PATMI were in line with expectations. FY23 revenue was at 98% of our FY23e forecasts, while PATMI was ~US$0.7bn below. Sea has hit its first profitable year since its IPO in 2017.

– Shopee is gaining market share against its competitors, with both GMV and gross orders growing strong (29%/46% YoY), driven by increased investments in the business since 3Q23. Garena is guided to increase by double digits after two years of decline.

– We raised our FY24 revenue growth rate/PATMI by 2%/ driven by higher e-commerce and gaming growth. We expect FY24 to be profitable given profitability contribution from Garena and Shopee. We roll over an additional year of valuations and downgraded our recommendation from Buy to Accumulate due to a recent share price change. Our DCF target price is raised to US$70 (prev. US$61), with an unchanged WACC/growth rate of 7.6%/3%.



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