DAILY MORNING NOTE | 15 June 2023

Singapore stocks surged higher on Wednesday (Jun 14) amid mixed regional trading as investors awaited the latest monetary policy decision from the US Federal Reserve. It rose 0.9 per cent or 28.74 points to close at 3,218.14. SIA has been on an 11-day winning streak, and it was also the most actively traded counter by value on Wednesday, with 19.4 million shares worth S$146.5 million changing hands. Across the broader market, gainers outnumbered losers 347 to 214 after 1.8 billion securities worth S$1.3 billion were traded.

Wall Street stocks finished mixed on Wednesday, after the Federal Reserve maintained current interest rates but signalled plans for additional rate increases. The Dow Jones Industrial Average dropped 0.7 per cent to 33,979.33. The broad-based S&P 500 added 0.1 per cent at 4,372.59, while the tech-rich Nasdaq Composite Index climbed 0.4 per cent to 13,626.48. The US central bank, as expected, opted to hold its benchmark lending rate between 5.0 per cent and 5.25 per cent. But forecasts from policymakers indicated strong support for two more hikes in 2023. Major indices tumbled just after the policy statement was released but recovered somewhat later during Fed Chair Jerome Powell’s press conference. Powell described inflation as still too high, but added that the central bank had made no decisions yet about its July meeting or subsequent gatherings.

SG

The application for the second fortnightly June tranche of MAS 6-month T-bills will be open today for investors to apply. The Auction Date, where the cut-off yield for this tranche will be announced, is on 22nd June 2023.
Latest Singapore 6-Month Treasury Bill result:
Cut-Off Yield: 3.84%
% of Non-Competitive Application Allotted: 100%

No Signboard Holdings has received a letter of demand from its landlord at the Orchard Gateway shopping mall for an outstanding payment of two months’ security deposit, the restaurant operator disclosed in a Wednesday (Jun 14) bourse filing. In the letter of demand, No Signboard was asked to pay the deposit of S$98,738.40 by Jun 16, to maintain a security deposit of S$147,735 and to reopen its Orchard Gateway outlet for business by the same date. If it fails to reopen the outlet and keep it open for business, No Signboard will have to pay damages of S$200 per day, the letter said. Failing this, the landlord may exercise its right to re-enter the premises or commence legal proceedings. No Signboard said that it is “seeking legal advice” on the matter. The development comes after the operator of hotpot chain Little Sheep terminated its franchise agreement with No Signboard, due to the failure to set up the required number of new restaurants under the agreement.

Keppel Corp has secured two contracts to provide what it dubs “energy-as-a-service” (EaaS) in Bangkok’s Sam Yan Smart City, through its joint venture (JV) with Decarb Corp. Keppel’s EaaS service enables businesses and building owners to enter a supply-and-service contract for energy usage and management without making significant upfront capital investments. The Thai EaaS contracts are with Centara Watergate and Watergate Pavilion, a hotel and a shopping mall, Keppel announced in a Wednesday (June 14) bourse filing. The company will design and retrofit the buildings’ existing chilled-water systems to improve their energy efficiency and asset performance. The projects are expected to be completed by 2024 and will have a combined design capacity of 1,350 Refrigeration Tonnes (RT).

OUB Centre, an indirect subsidiary of OUE Commercial Reit, has obtained an unsecured sustainability-linked loan (SLL) of S$430 million, its manager announced in a Wednesday (June 14) bourse filing. This is OUE C-Reit’s third SLL. It was obtained from new and existing lenders – OCBC Bank, Maybank Singapore, the Industrial and Commercial Bank of China, The Bank of East Asia and Qatar National Bank. OCBC was the sustainability coordinator for the transaction. The proceeds will be used for refinancing existing borrowings and general corporate purposes. With this facility, the Reit has no further refinancing requirements until 2025.

Singapore Paincare Holdings is eyeing an entry into the China market, with its 51 per cent-owned subsidiary agreeing to invest 40 million yuan (S$7.6 million) in community hospital operator PuXiang Healthcare Holding. The subsidiary, Singapore Paincare Capital (SGPC), has entered a share subscription agreement for 2.8 million new Series A+ preferred shares in PuXiang. This translates to a 2.26 per cent stake, Singapore Paincare announced on Wednesday (June 14). Founded in 2019, PuXiang owns and operates 15 community hospitals in Beijing, Hebei and Tianjin. It provides specialised services such as chronic disease treatment, aesthetics and dentistry.

Class A-1 private equity (PE) bonds issued by Astrea IV were fully redeemed on Wednesday (Jun 14), five years from their issue date in 2018. Known as the Astrea IV PE bonds, the class A-1 bonds had a fixed interest rate of 4.35 per cent per annum, paid every six months. The issue size was S$242 million. Bondholders who subscribed to the 2018 tranche also received a bonus 0.5 per cent redemption premium on the principal amount, as the performance threshold was met before the time of redemption. “The performance of the bonds bears testament to the strong fundamentals of the Astrea transactions and quality of the Astrea portfolios,” said Margaret Lui, chief executive officer of Azalea Asset Management. Within the same series, class A-2 bonds were also fully redeemed, while class B bonds were partially redeemed.

US

The Federal Reserve kept interest rates unchanged on Wednesday but signalled in new economic projections that borrowing costs will likely rise by another half of a percentage point by the end of this year as the US central bank reacted to a stronger-than-expected economy and a slower decline in inflation. In an effort to balance risks to the economy with a still unresolved fight to control inflation, “holding the target (interest rate) range steady at this meeting allows the committee to assess additional information and its implications for monetary policy,” the rate-setting Federal Open Market Committee (FOMC) said in a unanimous policy statement issued at the end of its latest two-day meeting. Further rate increases would “take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” it said. Speaking after the release of the Fed statement, Fed Chairman Jerome Powell noted that as the Fed has paused rates, “we’ve covered a lot of ground and the full effects of our tightening have yet to be felt.” Powell added nearly all Fed officials expect more rate rises this year, and he noted that even as officials have not decided what they will do with rates at coming meetings, the July FOMC gathering is a “live meeting” which could bring another rate increase. The Fed’s new projections, adding a hawkish tilt to Wednesday’s interest rate decision, show policymakers at the median see the benchmark overnight interest rate rising from the current 5.00 to 5.25 per cent range to a 5.50 to 5.75 per cent range by the end of the year.

US Treasury officials on Wednesday (Jun 14) unveiled rules for how non-profits, tribes and governments can take advantage of subsidies in President Joe Biden’s new climate change law, expanding the incentives beyond big corporations. The Inflation Reduction Act (IRA) offers billions of US dollars in tax credits to speed decarbonisation of the US economy. To encourage project development, the law also allows tax-exempt entities to receive a direct payment in lieu of tax credits and enables project owners to sell credits to a third party. The Treasury Department’s guidance on Wednesday allows non-profits, tribes, local governments and other tax-exempt entities to receive 12 of the IRA’s tax credits as cash payments, a provision known as elective or direct pay. The IRA includes a 30 per cent credit for renewable energy facilities like solar and wind farms, as well as credits for clean vehicles and fuels, hydrogen, carbon capture and storage and clean energy equipment manufacturing.

Federal Reserve Chairman Jerome Powell said on Wednesday that financial conditions are likely to allow the central bank to press forward with the drawdown of its massive balance sheet through the remainder of the year. As the Treasury moves toward selling massive amounts of debt to rebuild its financial position after the resolution of the debt ceiling battle, Powell noted there is a “very high” level of reserves in the banking system and stashed away at the Fed’s reverse repo facility. Because the system is so flush with cash, it gives the Fed ample room to press forward with letting Treasury and mortgage bonds run off its balance sheet. “We don’t think reserves are likely to become scarce in the near term or even over the course of the year,” Powell said. That observation implied the Fed can continue to move just under US$100 billion per month from its balance sheet, as it has been doing since last summer, possibly into 2024. The balance sheet drawdown has complemented the central bank’s more high- profile campaign of rate rises, which has seen its interest rate target go from near zero in March of last year to its current 5 per cent to 5.25 per cent range.

Prices in the cryptocurrency market slumped across the board after the Federal Reserve signalled the possibility of resuming its interest-rate hikes after pausing its tightening cycle. Bitcoin, which accounts for almost half the US$1 trillion crypto market’s value, tested the US$25,000 price level as it declined for a third day. Ether dropped around 4.6 per cent, while so-called altcoins such as XRP and Litecoin dropped around 8 per cent and 6 per cent, respectively.

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

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