Daily Morning Note – 17 June 2021
The U.S. Federal Reserve sees two rate hikes by the end of 2023. Officials signaled that the pace of the U.S. economic recovery from the pandemic is bringing forward expectations for how quickly they will reduce policy support. Fed chair Jerome Powell told a press conference that officials had begun a discussion about scaling back bond purchases and projected a faster-than-anticipated pace of tightening. Estimates for inflation for the next three years were upgraded. The central bank held the target range for its benchmark policy rate unchanged at zero to 0.25% — where it’s been since March 2020.
U.S. futures extended losses and Asia stocks looked set for a mixed start after the Fed’s statement. Treasury yields jumped with the dollar. Futures were little changed in Japan and Australia, and pointed lower in Hong Kong. S&P 500 contracts slipped after the benchmark closed down, but off its lows after Fed Chair Jerome Powell downplayed the risk of an immediate rate increase. Ten-year Treasury yields jumped eight basis points, while five- and seven-year equivalents rose more as the market repriced the timing of rate increases. A dollar index had its biggest jump in a year.
Fairfax Asia, which launched a cash offer for Singapore Reinsurance in March, will exercise its right to compulsorily acquire all the shares of dissenting shareholders.After that, the offeror will delist the mainboard-listed company, which underwrites general reinsurance and is also involved in investment activities of its non-reinsurance funds.
Soilbuild Construction Group’s wholly-owned subsidiary, Precast Concrete Builders (PCB), on Tuesday received a writ of summons and a statement of claim filed in the High Court of Singapore. The documents were filed by the lawyers of TG Development, the developer of luxury condominium The Peak @ Cairnhill II, at 61 Cairnhill Circle, near the Newton and Orchard MRT stations.
Chasen Holdings has secured new projects in specialist relocation services and third-party logistics (3PL) worth S$12.4 million in total. Two were signed by its China-based subsidiary, to provide move-in services for two thin-film-transistor liquid-crystal display (TFT LCD) manufacturers in Fujian province and Guangdong province. Both of these projects are scheduled to begin in the second half of this year, with one to be completed by March 2022 and the other by May 2022.
China’s real estate investment rose in May at its weakest clip this year as policy tightening on developers’ financing and mortgages gradually kicked in, although growth stayed resilient. Real estate investment in May rose 9.8 per cent from a year earlier, slowing from April’s figure of 13.7 per cent, Reuters calculations, based on data from the National Bureau of Statistics on Wednesday, showed. For the period from January to May, property investment grew 18.3 per cent over the corresponding period last year, slower than an increase of 21.6 per cent in January to April.
Property developer Hong Lai Huat Group will design, build and operate a mixed-use agricultural hub in Cambodia, with a total land size of about 10,000 hectares, estimated to be about one-seventh the size of Singapore. The mainboard-listed group has received official approval from the Cambodian government to convert its existing agricultural land in Aoral District, Kampong Speu Province, into a mixed-use development. Hong Lai Huat, which expects the development to add new revenue sources for the group, said the hub will set out the roadmap for the future growth of its real-estate division in the country.
Rex International’s 90 per cent-owned subsidiary, Lime Petroleum, will acquire Repsol Norge’s 33.8 per cent interest in the oil, gas and natural gas liquids-producing Brage field in Norway. In addition, Lime Petroleum will buy the five licences on the Norwegian continental shelf over which the field straddles.
Suntec Real Estate Investment Trust (Suntec Reit) has sold its 30 per cent interest in 9 Penang Road, formerly known as Park Mall, to Haiyi Holdings. The buyer will pay about S$89.9 million for the 15 million ordinary shares and 678 redeemable preference shares that Suntec Reit held in the joint venture (JV) company, which indirectly owns the property.
The Federal Reserve on Wednesday unexpectedly signalled backing for two interest-rate hikes in 2023 amid higher inflation. The S&P 500 slid after the Fed’s 2 p.m. Eastern Time policy statement, but pared losses as Fed chief Jerome Powell answered questions. Treasury yields jumped. The Federal Reserve’s post-meeting policy statement indicated that the U.S. economy had yet to make “substantial further progress” toward the Fed’s goal of maximum employment. Yet all of the other Fed policy signals turned more hawkish. The Fed’s quarterly economic projections showed that policymakers, as a group, see inflation pressures as somewhat more persistent. Plus, seven of 18 policymakers indicated a view that the Fed should start hiking rates in 2022. That group included just 4 of 18 members in March. Now 11 of 18 members see at least two rate hikes as appropriate in 2023 vs. 6 members in March.
Autonomous vehicle startup Waymo has raised $2.5 billion in new funding from parent Alphabet (GOOGL) and other investors. But the unit’s valuation has been a wild card for Google stock amid lowered expectations for self-driving cars. Waymo said investors that took part in the new funding round included Andreessen Horowitz, AutoNation (AN), Canada Pension Plan Investment Board, Fidelity Management and Research. Also on the list were Magna International, Perry Creek Capital, Silver Lake and Abu Dhabi’s Mubadala investment arm. Many previous investors took part in the new funding round. In early 2020, Waymo raised $2.25 billion in funding from outside investors. While Waymo’s valuation in that funding round was not disclosed in Google stock documents, reports said it was only $30 billion. Some analysts had given Waymo a valuation from $75 billion to more than $100 billion.
General Motors expects inflation, semiconductor shortage to add $3 billion in extra costs in second half. The increased costs include a greater-than-expected impact from the parts shortage during the third quarter as well as rising inflation costs of between $1.5 billion and $2 billion. Much, if not all of those costs, could be offset by the GM’s performance during the first half of the year. For the year, GM has said it expects pretax profits “at the higher end” of a $10 billion to $11 billion range.
McDonald’s CEO Chris Kempczinski said dine-in is here to stay, despite off-premise growth during the pandemic. For McDonald’s, dine-in customers make up about a quarter of its U.S. sales, Kempczinski said at CNBC’s Evolve Conference. Over the last year, digital ordering and drive-thru sales have surged across the fast-food sectors, helping McDonald’s and its rivals recover faster than the broader restaurant industry. McDonald’s, for example, saw its U.S. same-store sales turn positive by the third quarter of 2020. In its latest quarter, the company reported U.S. same-store sales growth of 13.6%.
Hyundai Motor Group is in talks with South Korean chip companies to help it reduce reliance on foreign supplies amid a global shortage that has halted assembly lines at automakers around the world, four people familiar with the matter told Reuters. Hyundai officials have met with local “fabless” firms – which design chips but outsource manufacturing to the likes of TSMC and Samsung Electronics – as it explores long-term strategies to better diversify its supply chain, according to two people at local fabless firms who met with Hyundai. The South Korean auto group wants to shift some of its auto chip orders such as microcontroller units (MCUs) to South Korean designers, but technology there still lags industry leaders such as Dutch automotive chip supplier NXP Semiconductors and Japan’s Renesas Electronics Corp, according to the people.
Blackstone Group offered to take over office developer Soho China for as much as HK$23.7 billion (S$4.05 billion), its biggest bet yet on the real estate market in Asia’s largest economy. The New York-based private equity firm is offering HK$5 in cash for each Soho share, it said in a Hong Kong stock exchange filing Wednesday, confirming an earlier Bloomberg News report that it was nearing a deal. The bid represents a 31.6 per cent premium to Soho’s last closing price before trading was suspended. Blackstone has been investing in office, retail and logistics assets in China since 2008 and owns approximately six million square metres of properties in the country, according to the statement. The firm is doubling down on Asia, seeking to raise at least US$5 billion for a fund focused on the region, people familiar with the matter have said.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
Keppel DC REIT
Analyst: Chua Wei Ren
Recommended Action: Technical SELL
price failed to break the neckline resistance zone as stated in our previous buy call report on 17th May. Prices peaked at $2.69. The subsequent sell-off has set off a strong downside momentum:
HK Reports – Read up on our Hong Kong reports here
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Date: 14 June 2021
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