DAILY MORNING NOTE | 18 October 2022
Singapore stocks ended lower on Monday (Oct 17) amid mixed regional trading, tracking last Friday’s decline on Wall Street due to persistent inflation concerns. The Straits Times Index (STI) fell 0.8 per cent or 23.86 points to close at 3,015.75. Losers outnumbered gainers 328 to 217, after 1.8 billion securities worth S$1.4 billion changed hands. Yangzijiang Shipbuilding led the decline on the STI, shedding 2.6 per cent to close at S$1.14. Some 36.4 million shares worth S$41.2 million were traded. The trio of local banks also fell on Monday. DBS lost 2 per cent to S$32.42, UOB lost 0.7 per cent to S$26.09, while OCBC lost 1 per cent to S$11.48. The top gainer on the STI was Thai Beverage, rising 3.5 per cent to close at S$0.585. Some 44.6 million shares worth S$25.6 million changed hands, making it one of the top traded counters by volume on Monday. Elsewhere in Asia, key indices were mixed. The FTSE Bursa Malaysia Index gained 0.3 per cent, the SSE Composite Index rose 0.4 per cent, while the Hang Seng Index was up by 0.2 per cent. Meanwhile, the Nikkei 225 Index declined 1.2 per cent.
Wall Street stocks scored solid gains on Monday, boosted by better-than-expected bank results that lifted hopes for earnings season. Bank of America became the latest US financial heavyweight to top estimates following on the heels of JPMorgan Chase and other banks that reported solid results on Friday. Analysts have been hopeful that a successful third-quarter earnings season could reset a market that has tumbled in 2022 due to worries over inflation and Federal Reserve interest rate hikes. The Dow Jones Industrial Average gained 1.9 per cent to 30,185.82. The broad-based S&P 500 jumped 2.7 per cent to 3,677.95, while the tech-rich Nasdaq Composite Index advanced 3.4 per cent to 10,675.80. Among individual companies, Bank of America surged 6.1 per cent as its chief executive, Brian Moynihan, said US consumers continue to demonstrate resiliency despite inflation. But much like rival financial giants, Bank of America added US$378 million in reserves in case of bad loans due to a potential recession.
The growth of Singapore’s key exports eased in September, dragged by a contraction in electronic shipments as well as declining deliveries to most of the Republic’s top 10 key markets, including China and Hong Kong, data from Enterprise Singapore (EnterpriseSG) showed on Monday. Non-oil domestic exports (NODX) in September grew 3.1 per cent year on year, down from the 11.4 per cent expansion in the previous month, as shipments of non-electronic products expanded, while that for electronics shrank. September’s performance was lower than what private-sector economists had expected – a growth of 6.9 per cent year on year, according to a Bloomberg poll. On a seasonally adjusted month-on-month basis, NODX shrank 4 per cent in September, extending the previous month’s 3.9 per cent decline, as both electronics and non-electronics exports contracted. This brings the total level of trade to S$116.5 billion in September, lower than the previous month’s S$118.3 billion. Electronic exports fell by 10.6 per cent year on year in September, continuing the previous month’s 4.5 per cent contraction.
Comment: NODX is dragged down by weakness in electronic exports. Electronic exports are negative on YoY basis for the 2nd consecutive month, after 20 months of expansion. Softness in electronic exports is not only in Singapore but also decelerating in both South Korea and Taiwan exports and global semiconductor sales.
Head Of Research,
Momentum in travel recovery has been the tailwind for Singapore Airlines September 2022 operating results, as SIA and Scoot carried 2.1 million passengers for the month. Demand remains strong across all routes except East Asia as travel restrictions remain in place in key markets. That was a 2.5 per cent increase in passenger capacity from the previous month, as group passenger capacity jumped 111.8 per cent from the previous year. This is about 67 per cent of pre-Covid-19 levels for September. Across all markets, passenger load factor (PLF) have improved at both SIA and Scoot, with the group level PLF at 87 per cent for September. This is a 1.6 percentage point increase month on month and a 68.5 percentage points increase from the year prior. With increased passenger services resulting in higher bellyhold capacity, cargo operations have seen capacity expand by 33.3 per cent. However, cargo operations have seen a 31 percentage point fall y-o-y to 56.4 per cent for September’s load factor, while loads have declined 14 per cent y-o-y. In September, SIA stepped-up services to East Asia, reinstating services from Beijing, while Scoot resumed flying to Fuzhou and Osaka. SIA served 74 destinations and Scoot 48 destination in September, while the cargo network comprises of 107 destinations. Shares of SIA closed down S$0.04 or 0.8 per cent to S$5.00 on Monday.
The number of new private homes sold in September more than doubled over the tally in August, on the back of two major launches that set new price benchmarks for suburban housing. According to data released by the Urban Redevelopment Authority (URA) on Monday (Oct 17), developers in Singapore sold a total of 987 units, excluding executive condominiums (ECs). This is a 125.3 per cent increase from August’s 438 units, and 18.3 per cent higher year on year. Including ECs, 992 units were sold in September, compared with 449 units sold in August and down 23.5 per cent from the previous year. Meanwhile, 913 units in total were launched last month, almost seven times the 134 units launched in August, and 29.3 per cent higher than the number launched in September 2021. Excluding ECs, September’s 913-unit tally was also significantly higher than the 210 units launched in the year-ago period. More than two thirds of the take-up of new private residential units, excluding ECs, were in the suburbs or outside central region (OCR) with 686 units sold. This was followed by the core central region and the city fringe, or the rest of the central region, with 198 units and 103 units sold respectively.
Berjaya Leisure Capital, controlling shareholder with approximately 67.4%, announced an exit offer price for Informatics Education Ltd at S$0.011 per share in cash and exit offer for the warrants at S$0.0001 in cash. Informatics Education Ltd was placed on the watch-list since 5 June 2017.
Shares of Roblox closed up 19% on Monday after the company released its September 2022 metrics report. The number of daily active users decreased from Roblox’s August 2022 report, when the company reported 59.9 million users. The number of hours engaged in September also decreased from 4.7 billion in August, and Roblox’s bookings in September fell from the $233 million and $237 million estimated bookings reported in August. The drop may have occurred as kids who play the game returned to school. Shares of Roblox are down about 65% from their highs. The stock was blazing hot in 2021 after Roblox’s direct listing in March. Its market cap neared $80 billion before peaking in November 2021. The company saw bookings swell more than 200% during the pandemic when kids were spending more time on their screens while stuck at home. But this year’s economic slowdown has punished high-growth tech stocks. Roblox CEO David Baszucki told CNBC in February that the company has “many opportunities to increase monetization” and he cited advertising and 3D immersive shopping as potential areas for growth. To date, the company has focused on “creating a safe and civil platform” and growing its daily active user base, Baszucki said. Chief Business Officer Craig Donato told CNBC’s Steve Kovach in August that Roblox is bullish on the future because of its investments in its employees, server capacity and global data centers.
Bank of America said Monday that quarterly profit and revenue topped expectations on better-than-expected fixed income trading and gains in interest income, thanks to choppy markets and rising rates. Bank of America said in a release that third-quarter profit fell 8% to $7.1 billion, or 81 cents a share, as the company booked a $898 million provision for credit losses in the quarter. Revenue net of interest expense jumped to $24.61 billion, on a non-GAAP basis. Shares of the bank rose 6.1%. Bank of America, led by CEO Brian Moynihan, was supposed to be one of the main beneficiaries of the Federal Reserve’s rate-boosting campaign. That is playing out, as lenders including Bank of America, JPMorgan Chase and Wells Fargo are producing more revenue as rates rise, allowing them to generate more profit from their core activities of taking in deposits and making loans. “Our U.S. consumer clients remained resilient with strong, although slower growing, spending levels and still maintained elevated deposit amounts,” Moynihan said in the release. “Across the bank, we grew loans by 12% over the last year as we delivered the financial resources to support our clients.” Net interest income at the bank jumped 24% to $13.87 billion in the quarter, topping the $13.6 billion StreetAccount estimate, thanks to higher rates in the quarter and an expanding book of loans. Net interest margin, a key profitability metric for bank investors, widened to 2.06% from 1.86% in the second quarter of this year, edging out analysts’ estimate of 2.00%. Fixed income trading revenue surged 27% from a year earlier to $2.6 billion, handily exceeding the $2.24 billion estimate. That more than offset equities revenue that dropped 4% to $1.5 billion, below the $1.61 billion estimate.
BP has agreed to acquire biogas producer Archaea Energy Inc for about US$4.1 billion including debt, the latest step in the UK energy giant’s expansion into lower-carbon fuels. BP will pay US$26 per share, a 38 per cent premium to the average share price in the 30 days to Oct 14, Archaea said on Monday (Oct 17) in a statement. The Houston-based company, which captures waste-gas emissions from landfills and farms, will become a key part of BP’s bioenergy business and accelerate its growth, said the statement. Archaea fits with BP’s “strategic focus on bioenergy”, Nick Stork, chief executive officer and co-founder of Archaea, said in the statement. The deal will “increase the role of renewable natural gas in helping customers reach their long-term climate goals”. Archaea was formed in 2021, when Rice Acquisition Corp merged with two other companies to create a giant in so-called renewable natural gas. The environmental benefit of the fuel comes largely from preventing emissions of the powerful greenhouse gas methane, which is created by the decomposition of organic waste under certain conditions. The company captures biogas at landfills or farms and processes it into pipeline-quality natural gas. Burning the fuel still releases carbon dioxide, but has a lower overall climate impact than if the methane had been allowed to simply vent into the atmosphere. Under CEO Bernard Looney, BP has sought to position itself at the leading edge of major oil companies’ efforts to curtail greenhouse gases and transition to cleaner forms of energy. It was one of the first to promise to achieve net-zero emissions by 2050 and has made big bets on offshore wind and electric cars. Even as the industry made record profits this year on the surge in oil and gas prices after Russia’s invasion of Ukraine, companies including BP, TotalEnergies and Shell have said they will continue to channel a growing portion of their cash flow into low-carbon energy sources, while transitioning away from fossil fuels as the main source of their revenue. In its latest guidance, Archaea said it planned to produce 10.9 billion cubic feet of gas a year, about 0.5 per cent of BP’s total gas output. BP shares erased earlier gains and were 0.5 per cent lower at 452.7 pence as of the lunch hour in London.
Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, CNBC, WSJ, The Business Times, PSR
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