DAILY MORNING NOTE | 12 September 2023
Trade of the Day
Analyst: Zane Aw
(Current Price: US$89.64) – TECHNICAL SELL
Sell price: US$89.64 Stop loss: US$93.50
Take profit 1: US$82.00 Take profit 2: US$73.50
Analyst: Zane Aw
(Current Price: S$1.17)Resistance Zone: S$1.24-1.29 Support Zone: S$1.11-1.15
Olam Group Ltd (SGX: VC2) Trading in a downtrend channel, potential retest of October 2022 swing lows.
Singapore shares rose 0.3 per cent on Monday (Aug 11) despite weak market sentiment in Asia. CapitaLand Ascendas Reit was at the top of the table, gaining 1.1 per cent or S$0.03 to S$2.81. The trio of local banks were also in the black. Both DBS and OCBC gained 0.8 per cent, while UOB gained 0.5 per cent. Meanwhile, Hongkong Land was the biggest loser, shedding 3.3 per cent or US$0.12 to US$3.52.
Wall Street bounced on Monday as investors snapped up tech stocks, capitalizing on their relatively lower prices following a recent lackluster spell in the US financial markets. The tech-rich Nasdaq Composite Index rose sharply to end the day up 1.1 per cent at 13,917.89. The S&P 500 gained 0.7 per cent to 4,487.46, while the Dow Jones Industrial Average picked up by 0.3 per cent to close at 34,663.72.
Olam Group has denied the allegations involving the group’s operations in Nigeria on Sept 11. Olam Nigeria was said to be involved in a “mega economic fraud” of over U$S50 billion ($68.13 billion), according to African publications, Daily Nigerian and Prime Business Africa over the weekend. “In a chain of round-tripping foreign exchange deals since 2015, the company, through its special purpose vehicles, SPVs, had booked about US$34 billion with the Central Bank of Nigeria, CBN, as capital importation at official rates,” says the Daily Nigerian in an article dated Sept 8. In its statement issued on Sept 11, Olam Group said that it refutes all “baseless and inflammatory statements” made in the articles, adding that the numbers mentioned are “manifestly inaccurate and designed to be misleading”. Based on the group’s audited financial statements, Olam’s cumulative turnover in Nigeria for the FY2025 to FY2022 stood at US$14 billion in total. The figure includes all export, import and domestic sales. Further to its statement, the group stressed that there are no “fictitious Nigerian directors” in Olam Nigeria. The group also doesn’t have a “network of shell companies” as stated in the articles. Finally, the group notes that Olam Nigeria itself has responded to the various requests for information by the authorities and that it will cooperate with further requests.
Advanced MedTech, a medical device maker backed by Singapore’s state-owned investment firm Temasek, has chosen to list in Singapore instead of the US, according to people with knowledge of the matter. A listing in the city-state may take place as early as the end of this year and could value the firm at about US$1 billion, they said. Advanced MedTech makes medical equipment with a focus in urology devices and contract manufacturing services, according to its website. Its products are available to patients in more than 100 countries.
Companies listed on the Singapore Exchange (SGX) that have released quarterly financial results or updates for the quarter to June reported aggregate profits of S$7.1 billion, a 16.7 per cent increase year on year. A compilation of the results by The Business Times (BT) as at end-August showed 57 of the 82 issuers were profitable for the quarter to June, while 25 were in the red. Of the 57 profitable companies, 26 posted a smaller bottom line. Another 23 managed to improve their earnings, and eight swung back into profitability from a loss in the year-ago period. Nine of the companies in the red managed to cut their losses, but 12 saw their losses balloon, and four became loss-making during the quarter. The local banking trio topped the earnings tally, with national carrier Singapore Airlines just behind.
Boustead Projects has secured a $70 million green loan to refinance Razer SEA HQ at one-north. The loan is extended to Snakepit-BP, a joint venture of the company set up for the development of Razer SEA HQ. The four-year secured green loan will be under UOB’s Sustainable Finance Framework for Green Building Developers and Owners. Developed by Snakepit and managed by Echo Base-BP Capital — also Boustead Projects’ joint venture firm — Razer SEA HQ has a committed occupancy of 100% as at March 31. Designed with sustainability in focus, the development incorporates 380 solar panels on its rooftop, generating 256,000 kWh of energy annually. “This marks our second green loan from UOB to date,” says Boustead Projects head of real estate Samuel Lim. “Boustead Projects continues to look out for available sustainability-linked financing options for our real estate business that would support our commitment to building a greener and more resilient tomorrow,” he adds.
Bank of America is keeping its guidance unchanged for expenses and net interest income (NII) for the second half of the year. “We have not given up the fight,” chief financial officer Alastair Borthwick said at a conference hosted by Barclays on Monday (Sep 11). “The key will be for us to drive organic growth and maintain expense discipline.” The CFO reiterated previous forecasts for NII – the revenue collected from loan payments minus what depositors are paid – at about US$14.2 billion to US$14.3 billion for the third quarter and US$14 billion for the fourth. Still, Borthwick said it’s going to be harder to keep NII at current levels. “I think that’s why we’re so focused on expense discipline,” he said. “At the same time, we’re pretty good at this.” The bank still projects expenses to be around US$15.6 billion for the quarter, compared to US$15.4 billion in the fourth quarter of last year.
Oracle reported earnings of US$1.19 per share, adjusted, vs. US$1.15 per share expected while revenue came in at US$12.45 billion, vs. US$12.47 billion expected. With respect to guidance, Oracle called for adjusted net income of US$1.30 to US$1.34 per share and 5% to 7% revenue growth in the fiscal second quarter. Oracle’s revenue grew 9% year over year in the fiscal first quarter, which ended Aug. 31, according to a statement. Net income increased to US$2.42 billion, or 86 cents per share, compared with US$1.55 billion, or 56 cents per share, in the year-ago quarter.
US President Joe Biden announced a series of semiconductor, aerospace and infrastructure deals with business leaders in Vietnam, part of the White House’s push to deepen economic integration with Indo-Pacific nations that can provide a bulwark to China. Biden touted a “new stage” in the ties between the two countries to a Hanoi meeting of officials and executives from Vietnam and top US companies including Boeing, Intel and Marvell Technology. “My message today is quite simple: Let’s keep it up,” he said. The announcements were intended to solidify Vietnam’s decision a day earlier to upgrade its relationship with the US to a “comprehensive strategic partnership” Headlining the deal announcements was a memorandum of understanding between Vietnam Airlines and Boeing to purchase 50 737-Max aircraft, a tentative agreement that would be valued around US$7.88 billion and allow the carrier to eventually replace ageing Airbus AE-A321 planes. Any delivery could be years off, however, as Boeing has sold out most of its production slots through the end of the decade.
Apple is extending an agreement to get modem semiconductors from Qualcomm for three more years, a sign that its ambitious effort to design the chips in-house is taking longer than expected. The new pact will cover “smartphone launches in 2024, 2025 and 2026”, Qualcomm said in a statement on Monday (Sep 11). The companies’ agreement had been set to end this year, and the latest iPhone – due on Tuesday – was expected to be one of the last to rely on the Qualcomm modem chip. Instead, Qualcomm will maintain its lucrative position within Apple’s supply chain. The iPhone maker is Qualcomm’s largest customer – accounting for nearly a quarter of revenue and their relationship helps validate Qualcomm’s claim to having the best smartphone modem, a critical component that allows devices to connect to the Internet and make calls. Starting with the iPhone 12 generation, the chip has supported speedier 5G networks.
Meta Platforms is working on a new artificial-intelligence system intended to be as powerful as the most advanced model offered by OpenAI, the Wall Street Journal reported, citing people familiar with the matter. The Facebook parent is aiming for its new AI model to be ready next year, the Journal said, adding it will be several times more powerful than its commercial version dubbed Llama 2. Llama 2 is Meta’s open source AI language model launched in July, and distributed by Microsoft’s cloud Azure services to compete with OpenAI’s ChatGPT and Google’s Bard. The planned system, details of which could still change, would help other companies build services that produce sophisticated text, analysis and other output, the newspaper reported. Meta expects to start training the new AI system, known as a large language model, in early 2024, the report added.
US-based crypto exchange Coinbase Global said it will disable some Indian accounts while adding that the company remains “committed” to opportunities in the nation over the long term. The firm continues “to explore ways to strengthen our presence in this important market,” the spokesperson added. Trading volumes collapsed in India in 2022 after the government imposed more stringent tax rules on the crypto sector, including a levy on trading. The central bank has voiced “major concerns” about private virtual currencies. Coinbase in April last year outlined ambitious hiring plans for India and tried to enable use of the Unified Payments Interface – the nationwide quick-payments network – for crypto purchases via its exchange. The company quickly scrapped the payments initiative under regulatory pressure. Coinbase halted new user sign ups to the Indian exchange in June, the spokesperson said.
China’s central bank yanked the yuan off a 16-year low against the US dollar on Monday (Sep 11) by setting a daily midpoint guidance rate with the strongest bias on record, signalling increasing discomfort with the currency’s recent weakness. Prior to the market’s opening, the People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2 per cent band, at 7.2148 per dollar, 3 pips firmer than the previous fix of 7.2150. For the past few months. The PBOC has set firmer-than-expected daily guidance rates to stem the yuan’s decline. The much strengthened midpoint fixing also limited the downside room for the yuan to sink. The lower edge of the daily trading band is capped at 7.3591.
Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, CNBC, WSJ, The Business Times, PSR
Recommendation: OVERWEIGHT (Maintained); Analysts: Jonathan Woo, Maximilian Koeswoyo, Zane Aw, Phillip Research Team
– FAANGM was the laggard for a 3rd straight month, declining -1.8% in August. S&P 500 and Nasdaq were also down -1.8% and -1.6%, respectively. 4 of 6 FAANGM companies recorded share price declines.
– AMZN was the biggest gainer (+4%) after shares reacted positively to better-than-expected earnings. META was the main laggard (-7%) likely due to some profit-taking post earnings.
– AI continues to drive product innovation, and customer interest in Cloud and digital advertising, which we believe should accelerate both revenue and earnings growth for most FAANGM stocks. Weakness in demand for tech hardware still persists. We maintain an OVERWEIGHT recommendation on FAANGM.
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