Daily Morning Note – 18 May 2020


U.S. stock futures advanced as investors weighed further reopening of economies around the world against fresh warnings that the road to recovery will be long. Asian stock futures pointed to a mixed start, while the yen nudged lower.

S&P 500 futures climbed 0.8%, following last week’s retreat for global shares. Equity futures edged down in Hong Kong, while those in Japan and Australia rose. Crude oil climbed. The pound dipped after a Bank of England official said the central bank is examining a range of unconventional policy tools, including negative interest rates.


China has asked trading firms and food processors to boost inventories of grains and oilseeds as a possible second wave of coronavirus cases and worsening infection rates elsewhere raise concerns about global supply lines. Both state-run and private grain traders as well as food producers were urged to procure higher volumes of soybeans, soyoil and corn during calls with China’s Ministry of Commerce in recent days, three trade sources told Reuters.

Australia urged China on Sunday to respond to its requests to discuss easing tensions between the two trading partners after Canberra called for an international enquiry into the origins of the novel coronavirus. China, accusing Australia of playing “petty tricks”, has recently suspended beef imports from four of Australia’s largest meat processors and is considering imposing hefty tariffs on imports of barley.

Banks in Asia’s financial hubs such as HSBC Holdings and Citigroup are finding that the disruption from the coronavirus outbreak is helping them push back on a threat from a new breed of virtual upstarts. With branches shut, customers social distancing and fearful of tainted cash, the brick-and-mortar giants are seeing a surge in demand for digital services for everything from wealth management to insurance. Now they are rolling out new video services and fresh mobile features for retail and affluent clients, speeding up a transformation to cement customer loyalty and reduce costs, consultants and bankers say.

Beleaguered Eagle Hospitality Trust (EHT) has posted a loss of US$8.9 million for the first quarter to March, mainly due to the impairment loss on trade receivables arising from the uncertainty on the master lessees’ ability to make rental payments and fulfil its obligations. Therefore, there is no income available for distribution for unitholders of the hospitality stapled group comprising Eagle Hospitality Real Estate Investment Trust (EH-Reit) and Eagle Hospitality Business Trust (EH-BT), according to EHT’s financial statements released on May 16.

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


Technical Analysis: Asia Markets

Key resistance level remains unbroken. Range bound expected

– Our report on 27th April 2020 indicates that the Asia market remains bearish.

– Albeit to a lesser extent, the Asian market experienced a second week of sell-down after a strong rebound 2 weeks ago.

– However, the Asia market remains range-bound after a failed attempt to rally past the indicated resistance level of 20,237.07 for Nikkei 225, 24,583.80 for Hang Seng Index and 2,669.40 for Straits Time Index.

– Price should remain range-bound for before a subsequent sell-off.

>> Read more technical reports


Thai Beverage – Dry spell in watering hole

Recommendation: BUY (Maintained), Last Done: S$0.67

Target Price: S$0.82, Analyst: Paul Chew

– 2Q20 revenue and earnings were below expectations. The 42% YoY collapse in Sabeco volumes hurt revenue and earnings. Excluding a one-off deferred tax hit of TBH1.08bn, PATMI would have risen 5% YoY.

– Spirits division revenue in 2Q20 declined 3.9% YoY due to weaker volumes but PATMI rose 9.5% YoY due to lower marketing cost.

– The ban in alcohol sales in Thailand from 10 April to 3 May, will temporarily suppress earnings in 3Q20.

– We are lowering our target price to S$0.80 (prev. S$0.95) as we cut earnings by 10%. Our BUY recommendation is unchanged. The slump in volume for Sabeco was worse than expected. And the damage from regulatory changes will linger longer than the current containment measures due to the outbreak. Nevertheless, the spirits business account for close to 90% of group earnings and we expect demand to be more resilient.

Singapore Banking Monthly – Building reserves as outlook dims

Recommendation: Neutral (Reduced), Analyst: Tay Wee Kuang

– Local interest rates continue sliding to 0.69% for 3M-SIBOR, representing a 131 bps decline YoY. This will negatively impact NIM in 2Q20. Our NIM estimates for FY20e were revised downwards by another 10 bps.

– March loans growth decelerated to 2.41% YoY, weighed down by consumer loans. We expect industry loans growth to remain intact at 2 – 3% for FY20e.

– Local banks announced their 1Q20 results, with higher levels of allowances weighing down performance.

– Tempered market volatility saw SGX’s DDAV experience a fall in April by 19% YoY. SDAV performed better with a growth of 35% YoY in April.

Reduce the Singapore Banking Sector to Neutral. Additional allowances under taken by banks as credit costs rise in the face of the pandemic will reduce earnings by 20 – 30% over the next two years. However, dividend yield of 5 – 7% remains attractive for investors

>> Read more research reports

HK Reports – Read up on our Hong Kong reports here


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Market Outlook: (PSR) DBS, UOB, OCBC, FCT, CMT, CCT, Ascendas REIT, ART, CAPL, SSG, STRH, NLT, VMS & Phillip Singapore Weekly

Date: 11 May 2020

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