DAILY MORNING NOTE | 16 January 2024

Trades Initiated in the past week

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Singapore shares edged up 0.2 per cent on Monday (Jan 15). Sembcorp Industries led the gainers, rising 1.5 per cent or S$0.08 to close at S$5.52. Shares of AEM Holdings plunged 8.8 per cent to S$3.10, with about 11 million shares transacted, a day after the semiconductor equipment maker disclosed a shortfall of 5 to 7 per cent from its last reported inventories of S$358.6 million as at end-September.

US stock markets were closed on Monday for the Martin Luther King, Jr. Day holiday.

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Events Of The Week

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SG

Singapore Airlines (SIA) posted a 15.8 per cent increase in passenger traffic in December 2023 during the year-end peak travel season. The airline’s revenue passenger kilometres, which indicates the number of passengers carried multiplied by the distance flown, rose 15 per cent to 10.1 billion in December 2023 from 8.8 billion the year prior. Passenger capacity outpaced passenger traffic at 16.1 per cent, resulting in a passenger load factor (PLF) of 89.4 per cent, 0.3 percentage points lower than the previous year. (Passenger load factor is expressed as a percentage of available seat-km.) SIA’s December 2023 PLF was 88.7 per cent, 0.4 percentage points lower than 89.1 per cent in the previous year. Scoot’s December 2023 PLF was 91.7 per cent, a 10-percentage-point increase from 91.6 per cent in the year before. Both airlines carried a combined 3.3 million passengers during the month, up 24.4 per cent from a year prior. Cargo carriage grew 4.3 per cent year on year on the back of stronger e-commerce demand. However, increased passenger services have resulted in higher bellyhold capacity, resulting in a cargo load factor of 52.6 per cent in December 2023, 1.7 percentage points lower than the previous year.

A Chinese subsidiary of Asian food giant Wilmar International has denied allegations by a city prosecution agency that one of its units was partially accountable for a trade fraud that led to a 5.2 billion yuan (US$725 million) loss for a state-owned company. Wilmar’s Yihai Kerry Arawana Holdings Co said in an exchange filing Friday that one of its units had been sued in the eastern province of Anhui over its alleged role in loss-making palm oil trades between a state-owned trader and a privately owned counterparty. The company, one of China’s top food processors, said it wasn’t involved in the fraud. The case focuses on state-owned trader Anhui Whywin International Co and its palm oil deals with private feed trader Yunnan Huijia Import & Export Co, according to the indictment cited in the filing. The prosecutor alleges that Huijia used forged documents to obtain palm oil deliveries from Whywin, without paying the full amounts, the indictment said. The prosecutor alleges that the Yihai Kerry unit was also involved in the case. Yihai Kerry said all transactions conducted by its Guangzhou unit in the trades were in compliance with normal practices and contractual agreements. The company did not obtain any improper benefit from Huijia, nor did it participate in the alleged fraud against Whywin, according to the filing.

SIIC Environment Holdings’ indirect 57.9%-owned subsidiary, Longjiang Environmental Protection Group, has secured the contract for its bid on the third phase of the Jiguan District Wastewater Treatment Plant (WWTP) Project in Heilongjiang, China. On Jan 15, the company announced that Longjiang Environmental had signed an agreement with the Jiguan Housing and Urban-Rural Development Bureau for the contract. The Jiguan Project has a designed capacity of 50,000 tonnes per day, with a concession period of 30 years. Separately, the company has also signed a supplementary water tariff increase agreement with the Shanghai Qingpu Water Authority for the Qingpu Second WWTP Project in Shanghai, China. The Qingpu Project has a total designed capacity of 240,000 tonnes per day, of which 180,000 tonnes are in operation and the remaining 60,000 tonnes are to be constructed. The agreement has retrospective effect from May 1, 2021. Both projects are expected to contribute positively to the company’s future performance.

China Everbright Water has secured several asset-light businesses and contracts in China and other countries as it dedicates greater efforts and resources towards balancing asset-light and asset-heavy businesses. The consortium led by China Everbright recently secured the construction and operation project of the industrial waste water treatment plant in the Huai’an Lianshui New Materials Industrial Park in Jiangsu Province, China. China Everbright will be responsible for providing operation and management services for a period of five years, with the option to renew for an additional three years upon expiry. With a total designed daily industrial waste water treatment capacity of 10,000 cubic metres, Lianshui New Materials Industrial Park Plant will be constructed in two phases, each of which has a designed daily treatment capacity of 5,000 cubic metres. Through its 80%-owned subsidiary, China Everbright has signed an equipment supply service agreement for the Tanzania Oilfield Waste Water Treatment Project and a technological process service agreement for the Abu Dhabi Paper Mill Waste Water Recycling Project. Both contracts amounted to a total contract value of US$2.2 million (S$2.9 million), with their successful implementation set to contributing to the development of the company’s overseas business expansion and service capabilities, as well as its effort to support China’s green Belt and Road Initiative development.

The sponsor of EC World Real Estate Investment Trust (Reit) has told the Reit manager that a lapse in an approval process has resulted in three properties being mortgaged without consent. The properties – Fuzhou E-Commerce, Fu Heng Warehouse and Hengde Logistics – were mortgaged without approval from EC World Reit. In response to the manager’s demand letter, the sponsor Forchn Holdings said it had been negotiating with Fuyang financial institutions to obtain relief funds. In the course of the negotiations, the financial institutions required the funds to be secured by assets. Forchn Holdings then provided a list of assets, which included the three properties. The financial institutions eventually decided on imposing a mortgage on various assets – which included the three properties. The sponsor’s treasury department did not go through the requisite approval processes of EC World Reit to execute the mortgages on the three properties. Instead, a written request was made by the department to Forchn Holdings’ chief executive officer to seek approval and usage of the company and legal representative seals. With the approval, the mortgages were executed on the three properties.


US

Apple is offering discounts of as much as 500 yuan (S$95.25) on its latest iPhones in China for the first time in years, a rare cut that may deepen fears about dwindling demand for its marquee device. Apple introduced the savings on its official Chinese website on Monday (Jan 15). The deal runs from Jan 18 to 21 ahead of the Chinese New Year shopping season, and the iPhone discount is equivalent to about 5 per cent off its top-of-the-line gadget. The move coincides with a growing preference within China for local brands such as Huawei Technologies, as well as edicts barring the use of foreign devices across a growing number of state-backed agencies and firms. The discounts this year encompass everything from the iPhone 13 to the iPhone 15 Pro Max. Apple will also offer savings on devices including the MacBook Air, most iPad models, some AirPods and the Apple Watch, according to its website. The company is knocking as much as 800 yuan off the MacBook Air’s price tag.

Microsoft on Monday said consumers and small businesses can buy subscriptions to access more capabilities in its artificial intelligence “Copilot,” as it moves to grow sales beyond large enterprises. After introducing a free AI Copilot for its Bing search engine last year, Microsoft will offer what it calls Copilot Pro to individuals for US$20 a month. The subscription will add a text-drafting, number-crunching AI assistant to Microsoft’s widely used applications including Word and Excel, and it will give purchasers access to new tools and AI models such as GPT-4 Turbo. The company also said it was removing a 300-person minimum requirement to buy the enterprise version of the software, making the security controls and Microsoft Teams upgrade that come with the US$30 per-month per-user Copilot available to smaller businesses.

US parcel delivery giant FedEx said that it has not seen much of a shift to air freight due to disruptions in the Red Sea that have tacked on nearly two weeks to shipping transit times. “Shipping over the ocean makes up 90 per cent of global commerce, so even a small change would have an impact, but we haven’t seen much yet,” CEO Raj Subramaniam said at the National Retail Conference on Sunday (Jan 14). Subramaniam, who took over the reins as CEO in June last year, said air freight rates have remained stable.

Boeing will add further quality inspections for the 737 MAX after an accident earlier this month where a fuselage panel was blown off an airplane, the head of its commercial airplanes division said Monday. The planemaker will also deploy a team to supplier Spirit AeroSystems – which makes and installs the plug door involved in the incident – to check and approve Spirit’s work on the plugs before fuselages are sent to Boeing’s production facilities in Washington state, Stan Deal, president of Boeing Commercial Airplanes, said in a letter to Boeing employees. In addition to the door plug inspections, Boeing teams will conduct checks at 50 other points in Spirit’s production process, Deal said. Meanwhile, both Boeing and Spirit will open its 737 production facilities to airline customers for carriers to provide their own inspections. Boeing will also hold sessions for employees on quality management, and bring in an outside party to conduct an independent assessment of its production process, Deal said.

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


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