DAILY MORNING NOTE | 18 October 2023

Trade of the Day

Palantir Technologies Inc. (NYSE: PLTR)

Analyst: Zane Aw

(Current Price: US$17.36) – TECHNICAL BUY
Buy price: US$17.36 Stop loss: US$16.50 (-4.95%)
Take profit 1: US$19.00 (+9.45%) Take profit 2: US$20.00 (+15.21%)

Singapore shares ended higher on Tuesday (Oct 17), taking their cue from key regional markets after a positive session on Wall Street. It rose 7.94 points or 0.3 per cent to 3,171.83 after 953.7 million securities worth S$811.7 million changed hands. Across the broader market, gainers outnumbered losers 287 to 255. Key regional indices largely recovered from Monday’s pessimism. The Hang Seng Index rose 0.8 per cent to 17,773.34, the Nikkei 225 ticked up 1.2 per cent to 32,040.29 and the Shanghai Composite moved up 0.3 per cent to 3,083.50. Australia’s ASX 200 expanded 0.4 per cent to 7,056.10 and the Kospi gained 1 per cent to 2,460.17.

Wall Street stocks ended the day mostly unchanged on Tuesday as traders digested stronger than expected retail sales data and company earnings including those of major banks. The Dow Jones Industrial Average was flat at 33,997.65. The broad-based S&P 500 was flat also at 4,373.20, while the tech-heavy Nasdaq Composite rose 0.3 per cent to 13,533.75. US retail sales increased more than expected last month, up 0.7 per cent from August according to government data. This adds to concerns that a further interest rate hike could be on the cards if the economy continues to run hot. The yield on the 10-year US Treasury note, closely watched as a benchmark on interest rates, climbed above 4.8 per cent.

SG

Engineering services company Boustead Singapore said it is in talks with its real estate unit Boustead Projects to come up with an exit offer that would comply with the Singapore Exchange’s (SGX) directive. Boustead Singapore was providing an update via a bourse filing on Tuesday (Oct 17) on its progress in complying with SGX’s delisting notice – a condition the regulator has set for granting an extension for the company to submit its proposal on the exit offer. SGX had issued a directive in Sep 26 for Boustead Projects to be delisted, as the issuer has not ensured that at least 10 per cent of the total number of issued shares are held by the public. Under SGX’s free-float requirement, an issuer must ensure that at least 10 per cent of its total number of issued shares are held by the public. If it is unable to do so, SGX may suspend its shares from trading, or give the issuer three months to ensure free float, and the company may be delisted.

Keppel real estate investment trust (Reit) has posted a 5 per cent increase in property income to S$172.6 million for its first nine months ended Sep 30, 2023, up from S$164.4 million in the corresponding period of the previous year. The improved performance was supported by higher rentals and increased portfolio occupancy, its manager said in its key business and operational update for the third quarter of 2023 on Tuesday (Oct 17). Distributable income from operations, however, fell 10.1 per cent to S$148.6 million for 9M 2023, due to higher borrowing costs, higher property tax and utility costs. These were partially offset by the higher property income and rental support, said Keppel Reit. Net property income attributable to unit holders went up 0.3 per cent to S$120.4 million from the previous year.

Singapore’s key exports shrank by 13.2 per cent year on year in September, easing from the 22.5 per cent slump in the previous month, data from Enterprise Singapore (EnterpriseSG) showed on Tuesday (Oct 17). This marks the 12th straight month of decline for Singapore’s non-oil domestic exports; both electronics and non-electronics exports fell. Still, September’s performance turned out to be better than the 15 per cent contraction that private-sector economists polled by Bloomberg were expecting. On a seasonally adjusted monthly basis, however, NODX grew 11.1 per cent last month as both categories of exports increased, undoing August’s 6.6 per cent decrease. This brought the seasonally adjusted value of NODX to S$14.5 billion in September, outperforming the previous month at S$13.1 billion.

US

Nvidia and a number of other chipmakers saw shares fall Tuesday morning after the U.S. announced new restrictions on exports of artificial intelligence chips to China. Shares of chip stocks have boomed in the last year due to the increased demand for AI products and services, which is powered by AI chips. The new restrictions on exports to China are a step up from previously announced restrictions on artificial intelligence chips that the Biden administration had implemented over the last year. The new restrictions ban the sale of the slowed-down version of Nvidia chips, the H800 and A800, that were allowed to be exported to China under the old restrictions. “The updates are specifically designed to control access to computing power, which will significantly slow the PRC’s development of next-generation frontier model, and could be leveraged in ways that threaten the U.S. and our allies, especially because they could be used for military uses and modernization,” U.S. Commerce Secretary Gina Raimondo said on a call with reporters.

Bank of America beat Wall Street estimates for quarterly profit on Tuesday (Oct 17) as it joined rivals in earning more from interest payments, while benefiting from a better-than-expected performance of its investment banking and trading divisions. “We added clients and accounts across all lines of business,” CEO Brian Moynihan said in a statement. “We did this in a healthy but slowing economy that saw US consumer spending still ahead of last year but continuing to slow.” Revenue at BofA’s consumer banking unit rose 6 per cent to US$10.5 billion. Spending on debit and credit cards was also resilient, rising 3 per cent in the quarter, BofA reported. The bank reported a profit of 90 cents per share in the quarter, beating analysts’ average expectations of 82 cents per share, according to IBES data from LSEG. The second-largest US bank’s net income rose 10 per cent in the third quarter to US$7.8 billion.

Goldman Sachs’ third-quarter profit dropped less than expected as a nascent recovery in dealmaking offset the US$864 million writedown related to GreenSky fintech business and investments in real estate. The Wall Street giant’s net profit slumped 33 per cent to US$2.06 billion, or US$5.47 per share, it said on Tuesday (Oct 17). Analysts on average had expected a profit of US$5.31 per share, according to LSEG data. “I also expect a continued recovery in both capital markets and strategic activity if conditions remain conducive,” CEO Solomon said in a statement. Goldman was an underwriter for high-profile initial public offerings (IPO) in September, including SoftBank Group’s chip designer Arm Holdings and grocery delivery app Instacart. The share sales sparked optimism about a recovery in IPO market, but poor performance after debuts and the lukewarm reception to Germany’s sandal maker Birkenstock have raised doubts.

Retail sales in the United States came in stronger than expected in September, according to government data released on Tuesday (Oct 17), supported partly by sales in the auto sector and at petrol stations. Sales rose 0.7 per cent last month in the world’s biggest economy, reaching US$704.9 billion, while the pace of growth in August was revised upwards to 0.8 per cent, the Commerce Department on Tuesday. While the latest figure marks a slight slowdown, it remains hotter than analysts expected. US consumption has shown resilience despite higher interest rates, after the central bank embarked on an aggressive campaign to lower inflation last year.

General Motors said Tuesday it is delaying production of all-electric trucks at a Michigan plant by at least a year to “better manage capital investments” and implement improvements in an effort to make the new EVs more profitable. GM now plans to begin construction of its next-generation EVs at Orion Assembly in suburban Detroit by late 2025, instead of next year. The factory currently produces Chevrolet Bolt EV models, which GM will cease producing at the end of this year. The delay is the latest sign of potential trouble for the ambitious, multibillion-dollar plans of traditional automakers to move to electric vehicles. Adoption of EVs, which remain costly to produce and purchase, has been slower than many expected.

Johnson & Johnson on Tuesday reported adjusted earnings and revenue that topped Wall Street’s expectations, and lifted its full-year guidance as sales in the company’s pharmaceutical and medical devices businesses surged. It marks J&J’s first quarterly results since it completed the separation from its consumer health spinoff Kenvue in August, the company’s biggest shake-up in its 137-year history. Upon that separation in August, J&J also lowered its full-year sales and profit guidance. The drugmaker raised that revised outlook on Tuesday: J&J expects 2023 sales of $83.6 billion to $84 billion, compared with previous guidance of $83.2 billion to $84 billion in August. J&J also expects adjusted earnings per share of $10.07 to $10.13, up from a previous forecast of $10.00 to $10.10. J&J also said it recorded a one-time, non-cash gain of $21 billion as part of the split of Kenvue. The pharmaceutical giant reported net income of $4.31 billion, or $1.69 per share. That was flat compared with net income of $4.31 billion, or $1.62 per share, for the same period a year ago. J&J reported $13.89 billion in pharmaceutical sales, which grew more than 5% year over year. Excluding sales of its unpopular Covid vaccine, the pharmaceutical division raked in $13.85 billion.

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

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