DAILY MORNING NOTE | 15 September 2023

Singapore shares rose 1 per cent amid a regional rally on Thursday (Sep 14). DBS was the top gainer, rising 1.6 per cent or S$0.55 to S$34.09. The other local banks were also in the black, with UOB gaining 1.3 per cent to S$28.99, and OCBC rising 1 per cent to S$12.70. Meanwhile, Frasers Logistics and Commercial Trust landed at the bottom of the table. Its units shed 0.9 per cent, or S$0.01, to finish at S$1.15.

US stocks closed higher on Thursday, while shares of the chip designer Arm popped on its trading debut. The Dow Jones Industrial Average rose 1.0 per cent to 34,907.11, while the broad-based S&P 500 ended the day up 0.8 per cent at 4,505.10. The tech-rich Nasdaq Composite Index also advanced 0.8 per cent to 13,926.05

SG

The latest issue of Singapore’s six-month T-bills, issued by the Monetary Authority of Singapore, posted interest rates of 3.73 per cent. This is a slight rebound from last month’s low of 3.7 per cent. Demand for this tranche’s T-bills was the same as last month, with a bid-to-cover ratio of 2.03 as the total amount that was applied for reached S$11.2 billion, against a total of S$5.5 billion allotted. Of the allotted T-bills, S$1.6 billion was allotted to non-competitive applications. All who applied non-competitively were allotted. Approximately 55 per cent of those who made a competitive application at the cut-off were allotted, up from last month’s 29 per cent.

The Singapore Exchange (SGX) is implementing a new organisational structure, which includes the appointment of Michael Syn as the bourse’s new president and head of its global markets division. On Thursday (Sep 14), SGX said that key changes for its new structure will take effect from Oct 1. Syn, who first joined the bourse as its senior vice-president and head of derivatives in 2011, has been holding the enlarged role as head of equities since July 2019. All business lines except for indices will be under his purview in the new role. This will cover all asset classes, namely: equities, fixed income, currencies and commodities. The newly formed wholesale markets and platforms division will be led by SGX’s current head of fixed income, currencies and commodities, Lee Beng Hong. Chief financial officer Ng Yao Loong will oversee the development of the indices business with a focus on partnerships, while chief technology officer Tinku Gupta will be appointed the bourse’s chief information officer to oversee technology and operations.

DBS Group Holdings sees China continuing to be consequential for the bank even as the country grapples with headwinds in the short-term, according to the chief of Southeast Asia’s largest bank. The lender sees long-term opportunities in the country and is still investing in Asia’s biggest economy despite the ongoing property crisis, Chief Executive Officer Piyush Gupta said in an interview at the Reuters Newsmaker event in the city-state. He highlighted electronic vehicles and technology among the industries the bank is positive on. Gupta acknowledged there’s no immediate “quick fix” for the ongoing crisis in the property sector, which makes up some 30% of China’s economy. DBS halted property financing in China about three to four years ago as well as slowed the pace of growing its credit exposure and loan book in the country as the bank had anticipated the slower cycle, Gupta said. The Singapore-based bank remains interested to increase its 13% stake in Shenzhen Rural Commercial Bank, Gupta said, without elaborating on how large he would like the shareholding to be.

LHN Limited reported occupancy rates of 85 per cent to 100 per cent for three of its co-living locations in Singapore as at Sep 7, with average rental rates across the Singapore co-living business ranging from S$2,200 to S$3,500. In a bourse filing on Thursday (Sep 14), the Catalist-listed real estate management services group provided an update on its four main business segments: space optimisation, property development, facilities management, and energy. The group managed a total of 2,064 keys across its co-living projects in Singapore and overseas as at Jun 30. It has also since May secured 35 new facilities-management contracts and re-tendered 22 contracts. In addition, the group, which aims to become a leading service and solutions provider for car parks in Singapore and Hong Kong, has launched six car park projects since May, with 760 vehicle parking spaces. In July, LHN signed a 15-year power purchase agreement with the Textile Centre in Jalan Sultan. Under this agreement, the group will invest, supply and install a solar photovoltaic system, with an approximate output of 352 kilowatts peak, on the building’s rooftop. Installation works are in progress, and the system is expected to be operational by end-October, LHN said. A unit in the group will own and maintain the system, which has 618 solar panels, over the term of the contract.

Ley Choon Group Holdings Limited announced on Thursday (Sep 14) that the Company’s subsidiaries, Teacly (S) Pte Ltd and Chin Kuan Engineering and Contractors Pte Ltd, have successfully secured contracts worth approximately S$6.3 million in aggregate for the supply, laying and maintenance of underground utilities pipelines. The Contracts are expected to be completed within approximately 24 to 36 months. Barring any unforeseen circumstances, the Contracts are expected to progressively contribute to the Group’s financial performance after the commencement of the Contracts.

SMI Vantage has signed an offer to rent agreement by its wholly-owned subsidiary SMI CS, allowing the company to set up its Bitcoin mining business in Malaysia’s state of Sarawak, Borneo. The company will fit out the facility with Bitcoin mining machines housed in containerised shells. The new machines, together with the lower cost of electricity, enables SMI Vantage to mine Bitcoin more cost-effectively, it says in a filing. SMI Vantage will begin the process of installing the first of its two containerised mining rigs and expects to commence mining Bitcoin in 3Q2023. The agreement was advised by Sovereign Systemtechnik (Sarawak), with whom a strategic partnership agreement was signed in Sept 2022 to investigate a number of new business opportunities including data centre management, food and beverages as well as other business areas of interest to SMI Vantage.

US

Inflation at the wholesale level rose more than expected in August. The producer price index (PPI) increased a seasonally adjusted 0.7% in August and 1.6% on a year-over-year basis against estimates for 0.4% and 1.2% respectively, the U.S. Department of Labor reported. The monthly gain was the largest single-month increase since June 2022. However, excluding food and energy, core PPI climbed 0.2%, in line with estimates. On a 12-month basis, core PPI increased 2.1%, its lowest annual level since January 2021.

Shares in SoftBank’s Arm Holdings soared almost 25% above their Nasdaq debut price on Thursday. The stock, which had opened at US$56.10, notched a 24.69% gain to close at US$63.59, giving the British chip designer a valuation of US$65 billion in its return to public markets following a seven-year absence. The IPO had priced at US$51.

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Adobe provided a sales outlook that met analysts’ expectations, but disappointed investors who expected demand for the company’s artificial intelligence (AI) tools would boost revenue. Sales will be US$4.98 billion to US$5.03 billion in the period ending in November, the San Jose, California-based company said on Thursday (Sep 14). Analysts, on average, projected US$5 billion, according to data compiled by Bloomberg. Profit, excluding some items, will be as much as US$4.15 a share, compared with the average estimate of US$4.06. The company said fiscal fourth-quarter sales in the Digital Media unit, which includes signature offerings such as Photoshop, will be as much as US$3.7 billion, beating the average estimate of US$3.66 billion. Revenue in the Digital Experience unit, which includes marketing and analytics software, will be about US$1.26 billion, meeting the average projection. Fiscal third-quarter sales increased 10 per cent to US$4.89 billion, exceeding the average projection of US$4.87 billion. Profit, excluding some items, was US$4.09 a share, compared with the average estimate of US$3.98. Digital Media revenue gained 11 per cent to US$3.59 billion in the period ended Sep 1. Sales in Digital Experience jumped 10 per cent to US$1.23 billion.

The European Central Bank raised interest rates for the 10th consecutive time to choke inflation out of an increasingly feeble economy. Officials increased the deposit rate by 25 basis points to a record 4% and said the new level of constriction will make a “substantial contribution” to bringing inflation under control. The Governing Council in Frankfurt repeated language that it will keep borrowing costs at “sufficiently restrictive levels for as long as necessary.” That could keep the door open to further hikes should inflation prove more sticky than thought. New forecasts by ECB staff presented on Thursday had been billed as a key source of input for the decision. Lagarde, presenting the projections in Frankfurt, said that the economy will stay “subdued” in coming months. The new outlook shows markedly softer annual economic expansion through 2025, while inflation will weaken to average 3.2% in 2024 and then 2.1% in the final year of that outlook. Underlying consumer-price growth will be a touch stronger at the end of the horizon, averaging 2.2% in 2025.

China’s central bank said on Thursday it would cut the amount of cash that banks must hold as reserves for the second time this year to boost liquidity and support the country’s economic recovery. The People’s Bank of China (PBOC) said it would cut the reserve requirement ratio (RRR) for all banks, except those that have implemented a 5% reserve ratio, by 25 basis points from Sept. 15. The reduction follows a 25-bps cut for all banks in March and comes as the world’s second-biggest economy is struggling to sustain a post-pandemic recovery. China’s economy is facing sluggish demand, and “the RRR cut can better guide financial institutions to increase support for the real economy and boost the confidence of market players,” said Wen Bin, chief economist at Minsheng Bank. The move is expected to free up over 500 billion yuan (US$68.71 billion) for medium to long term liquidity, an official at the central bank was cited by state media Xinhua as saying. The central bank said the weighted average reserve requirement ratio (RRR) for financial institutions stood at around 7.4% after the cut.

Tesla is planning to source as much as US$1.9 billion worth of auto components from India this year, according to the South Asian country’s government. The electric carmaker bought parts worth US$1 billion from the nation last year, India’s Commerce and Industry Minister Piyush Goyal said at an event in New Delhi on Wednesday (Sep 13). Chief executive officer Elon Musk in June said Tesla will make significant investments in the country, following his meeting with Indian Prime Minister Narendra Modi in the US.

Grab has partnered with crypto giant Circle to pilot Web3 customer experiences in Singapore through the integration of Circle’s new Web 3 Services platform in the Grab app. Available as the ‘Grab Web3 Wallet,’ Singapore-based users may set up a blockchain-enabled wallet, earn rewards and collectibles, and use non-fungible token vouchers. Launched as a pilot for the SG Pitstop Pack, the collaboration supports the Monetary Authority of Singapore’s (MAS) Project Orchid initiative as a real-world demonstration of Purpose Bound Money.

Google parent Alphabet is laying off employees from its global recruiting team as the tech giant continues to slow hiring. The company’s decision to let go of a few hundred employees is not part of a wide-scale layoff and will retain a significant majority of the team for hiring critical roles. It will also help the workers search for roles within the company and elsewhere.

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

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