Daily Morning Note – 13 May 2022

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PHILLIP SUMMARY

The Straits Times Index (STI) fell 1.9 per cent or 60.89 points to close at 3,165.18 on Thursday (May 12), as Asian markets tumbled on inflation fears following the release of US consumer price index (CPI) data. In the wider Singapore market, losers outnumbered gainers 418 to 149, after 2.09 billion securities worth S$1.99 billion changed hands. The sole gainer on the blue-chip index on Thursday was SGX, which rose 1.2 per cent or S$0.11 to S$9.50. At the bottom of the table was Yangzijiang Shipbuilding, which plunged 11 per cent or S$0.10 to end at S$0.81. The counter was also among the most actively traded counters, with 55.9 million shares traded.

Wall Street’s main indexes opened lower on Thursday (May 12), led by growth stocks, as investors worried that aggressive interest rate increases to curb decades-high inflation could tip the economy into recession. The Dow Jones Industrial Average fell 135.07 points, or 0.42 per cent, at the open to 31,699.04. The S&P 500 opened lower by 31.23 points, or 0.79 per cent, at 3,903.95, while the Nasdaq Composite dropped 164.98 points, or 1.45 per cent, to 11,199.25 at the opening bell.


Top gainers & losers

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BREAKING NEWS

SG

Sasseur Real Estate Investment Trust (Sasseur Reit), which owns outlet malls in China, is finding itself caught in a rising interest rate environment as it carries out a refinancing exercise for its quickly maturing loans. But its manager’s chief executive officer (CEO) Cecilia Tan believes that the Reit will be able to mitigate the situation and go away with “some level of savings” to secure higher distributions per unit (DPU), because the exercise entails increasing the proportion of its offshore debt. The refinancing exercise, expected to complete by the end of this year, is aimed at de-risking its current debt profile by staggering its debt maturity and amount. Currently, 53 per cent of Sasseur Reit’s loans are onshore loans with an outstanding quantum of 1.3 billion yuan (S$276 million), maturing in March 2023. Its offshore debts – S$214 million and US$20 million – have the same maturity date. The weighted average cost of debt as of Mar 31, 2022 was 4.4 per cent.

Drinks manufacturer Fraser and Neave (F&N) will be switching the packaging of its in-house brands and products to sustainable alternatives produced by its indirect subsidiary, Print Lab, F&N chief executive officer Hui Choon Kit has said. “We see that as an advantage. Consumers who care see it as an advantage,” he added. Some of these alternatives include a plastic bag substitute made entirely out of the roots of the cassava plant, paper bags that are recyclable or sustainably sourced, as well as compostable food packaging, all of which are produced in a new eco-friendly manufacturing plant called the Green Lab.

Moody’s Investors Service has changed its outlook on Ascott Residence Trust (ART) and Frasers Hospitality Trust (FHT) to “stable” from “negative” while affirming its Baa3 rating for both trusts. The credit rating agency expects both ART and FHT to benefit from the resumption of leisure and business travel, as movement restrictions ease and borders open across most countries. In a report released on Thursday (May 12), Moody’s analyst Tay Yu Sheng said its change in outlook for FHT to “stable” reflects an improvement in the hospitality trust’s liquidity, Tay also expects FHT’s credit metrics to improve in the next 18 months, supported by a recovery in operating performance and recent asset divestment. The outlook change for ART meanwhile, incorporates Moody’s expectation that the real estate investment trust (Reit) will remain financially prudent when executing its planned investments in longer-stay accommodation. Doing so will allow it to improve earnings diversification and buffer against the volatile hospitality sector, Tay added.


US

The pandemic stock-market and cryptocurrency bubble has officially burst, and now the question is whether the speculative unwind will trigger a global financial crisis. The broad Standard & Poor’s 500 has fallen 18 per cent from its 2020 highs, the closest that the traditional US stock-market gauge has come to a bear market since the crash at the start of the pandemic in early 2020. For the more speculative Nasdaq Composite, the damage is much worse, with a loss of 29 per cent. Bull-market leaders like electric-vehicle makers are short-circuiting. Even the mega-cap tech stocks such as Apple, Amazon and Facebook parent Meta Platforms, which seemed to be invulnerable to economic and market cycles, are now deep in bear-market territory.

US Mortgage rates jumped again this week, extending a steep climb that is shutting some would-be homebuyers out of the market. The average for a 30-year loan was 5.3 per cent, up from 5.27 per cent last week and the highest since July 2009, Freddie Mac said in a statement on Thursday (May 12). Rates tracked yields for 10-year Treasuries, which last week reached 3 per cent for the first time since 2018. US consumer prices rose more than forecast in April, signalling the Federal Reserve will need to be aggressive in its efforts to contain inflation. As the Fed raises benchmark interest rates, mortgage costs are expected to follow.

Facebook owner Meta Platforms Inc is preparing cutbacks in its Reality Labs division, a unit at the centre of the company’s strategy to refocus on hardware products and the “metaverse,” a spokesperson confirmed to Reuters on Wednesday. Chief technology officer Andrew Bosworth told Reality Labs staffers during a weekly Q&A session on Tuesday to expect the changes to be announced within a week, according to a summary of his comments viewed by Reuters. The Meta spokesperson confirmed that Bosworth told staffers the division could not afford to do some projects anymore and would have to postpone others, without specifying which projects would be affected.

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


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