Daily Morning Note – 12 October 2018

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YOUR PHILLIP SUMMARY

On Thursday, U.S. stocks tumbled a second day, with major averages notching wild swings in heavy volume. Treasuries surged after a strong 30-year auction, the dollar fell with oil, and gold, that traditional safe haven, posted its biggest gain in more than two years. The S&P 500 Index fell more than 2 percent for a second straight day and is now in its longest slide since 2016. The Dow Jones Industrial Average dropped more than 500 points in volatile trading that saw the benchmark gain and lose 300 points in the last 45 minutes of the session. Tech shares, which bore the brunt of the selling Wednesday, fared relatively better Thursday, although the Nasdaq 100 Index’s losses from an August record reached 9 percent.


Source: Bloomberg

RESEARCH REPORT

Singapore Coal Monthly – Prepare for higher coal demand in winter

Recommendation: OVERWEIGHT, Analyst: Chen Guangzhi

– Slight relaxation of air pollution control for the upcoming winter in China

– Restriction on coal import remains

– Lifting 2018 domestic production target in Indonesia

– Facing a hurdle to ramp up production

BREAKING NEWS

Oil falls 3% as equity markets drop, inventories climb. Oil prices slumped to more than two-week lows on Thursday as global stock markets fell, with investor sentiment made more bearish by a bigger-than-expected build in US crude inventories. Brent crude futures fell US$2.83 to settle at US$80.26 a barrel, a 3.41 per cent loss, after hitting a low of US$79.80, its weakest since Sept 24. The global benchmark has retreated after hitting a four-year high of US$86.74 on Oct 3. US West Texas Intermediate (WTI) crude futures fell US$2.2 to settle at US$70.97 a barrel, a 3.01 per cent loss. WTI hit its lowest since Sept 21.

US curbs China nuclear exports as Trump warns Americans not ‘stupid’. The United States said Thursday that it will increasingly restrict civilian nuclear exports to China as President Donald Trump vowed a hard line on trade, bluntly warning not to think Americans are “stupid.” The US Energy Department said it would make it more difficult to ship nuclear technology to China, one of the few growing markets for new plants as the Asian economy tries to meet rising electricity demand through low-carbon sources.

Singapore Q3 GDP growth slows less than expected to 2.6% as manufacturing moderates. Singapore’s economic growth grew at a slower pace of 2.6 per cent year on year in the third quarter of 2018 compared to the 4.1 per cent expansion seen in the previous quarter. But even as the economy appears to lose steam, the latest print was still a notch higher than economist expectations of 2.4 per cent growth. And on a quarter-on-quarter seasonally-adjusted annualised basis, the economy expanded by 4.7 per cent, faster than the 1.2 per cent growth in the preceding quarter.

MAS tightens Singdollar policy further in October policy decision. The Monetary Authority of Singapore said on Friday that it is slightly increasing the slope of the Singdollar nominal effective exchange rate policy band, consistent with a “modest and gradual appreciation path … that will ensure medium-term price stability”, in the second consecutive tightening at its half-yearly monetary policy review. The width of the policy band and the level at which it is centred will be unchanged.

Yangzijiang forms US$99.9 million joint venture with Japanese peers to build commercial vessels in China. Yangzijiang Shipbuilding (Holdings) has set up a joint-venture shipbuilder in China, with Japan’s Mitsui E&S Shipbuilding and Mitsui & Co as partners. Yangzijiang will own 51 per cent of the joint venture, which will produce commercial vessels from April 2019 out of its Taicang yard in Jiangsu, China. According to the company, the registered share capital of the joint venture could be as much as US$99.9 million, while the total capital to be employed could go up to US$299 million.

Delong CEO pulls out of privatisation bid on requirement to raise offer price to S$7.42 a share. The voluntary conditional cash offer of S$7 a share made on Sept 27 was withdrawn on Thursday in an announcement from PrimePartners Corporate Finance, acting for bid vehicle Best Grace Holdings. But hiking the offer price to S$7.42 a share will “precipitate very substantial contingent liabilities that materially exceed the financial resources arranged for the offer”, said the announcement.

Sasseur Reit loses PE firm L Catterton Asia as substantial unitholder. Private equity firm L Catterton Asia is no longer a substantial unitholder of Sasseur real estate investment trust (Reit), after it sold part of its stake in the Reit’s sponsor, Sasseur Cayman Holding. Its deemed stake was cut from 58.86 per cent to 1.36 per cent, a regulatory filing late on Thursday showed.

Source: SGX Masnet, Bloomberg, Reuters, The Business Times, Channel NewsAsia, Phillip Securities Research

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