DAILY MORNING NOTE | 18 September 2023

Trades of the Day

JP Morgan Chase & Co. (NYSE: JPM)

Analyst: Zane Aw

(Current Price: US$149.25) – TECHNICAL BUY
Buy price: US$149.25 Stop loss: US$144.00
Take profit 1: US$154.00 Take profit 2: US$162.00

Micron Technology, Inc. (NASDAQ: MU)

Analyst: Zane Aw

(Current Price: US$71.79) – TECHNICAL BUY
Buy price: US$71.79 Stop loss: US$68.00
Take profit 1: US$80.00 Take profit 2: US$84.00

Week 38 equity strategy: The highlight undoubtedly this week will be the Federal Reserve interest rate decision on 20 September. Our base case of unchanged interest rates is aligned with the futures markets. We do expect the Fed to sound hawkish and leave the door open to rate hikes if inflation reaccelerates. On the latest inflation reading, core CPI in August was modestly lower at 4.35% YoY in August (prev. +4.65%). Rent remains the primary driver of inflation, climbing 7%. It is a notable lagging indicator despite the market rent declining continuously. Rental CPI picked up from 4Q22. We expect a more meaningful drop in rent inflation in the coming months as the base year comparison starts to fade out. Market-based rental growth peaked in 1Q22.

In China, macro indicators are largely soft. Retail sales did nudge up 4.6% YoY (prev. +2.5%), but property sales remain weak, falling 26% YoY in August. From a peak of around 15mn in June21, new home sales in China have collapsed 40% to a trailing 9mn currently. Even this level may be high. Using 8.5mn marriages and 3mn new households per year, demand for homes is approximately only 7mn. Beyond property, another pressing issue to resolve is the estimated US$9tr debt at the local government financing vehicles. With local governments highly leveraged and land sales ebbing, their ability to spend or even repay existing creditors will be a drag on the Chinese economy.

Paul Chew
Head Of Research
paulchewkl@phillip.com.sg

Singapore shares gained 1 per cent or 31.18 points to 3,280.69 on Friday (Sep 15) amid a lifting of sentiment across regional markets as Chinese economic data beat expectations. For the week, the singapore shares ended up 2.3 per cent. Across the broader market, gainers beat losers 351 to 227 after 1.8 billion securities worth S$1.7 billion changed hands. Major markets in the region ended in the black. Japan’s Nikkei 225 index and South Korea’s Kospi gained 1.1 per cent, while Hong Kong’s Hang Seng Index rose 0.8 per cent.

US stocks ended sharply lower on Friday (Sep 15) as chipmakers dropped on concerns about weak consumer demand, while rising Treasury yields pressured Amazon and other mega-cap growth companies. Chip equipment makers Applied Materials, Lam Research and KLA all dropped more than 4 per cent after Reuters reported TSMC had asked its major vendors to delay deliveries. The S&P 500 dropped 1.22 per cent to end at 4,450.32 points. The Nasdaq declined 1.56 per cent to 13,708.34 points, while the Dow Jones Industrial Average fell 0.83 per cent to 34,618.24 points. All 11 S&P 500 sector indexes declined.

SG

Air travel traffic between Singapore and China is slowly but surely recovering from the impact of the pandemic, with passenger and flight volumes at Changi Airport now at over 70 per cent of pre-pandemic levels. Operator Changi Airport Group (CAG) recorded passenger movements of 510,000 between the two countries in August. This was 72 per cent of the figure recorded in August 2019, before the pandemic hit Singapore in January 2020. CAG noted that August 2023 was the first time passenger movements to and from China crossed the half-million mark since the pandemic. The company attributed the improved traffic to the gradual easing of travel restrictions by China.

National carrier Singapore Airlines and its budget arm Scoot flew 34,900 fewer passengers in August compared to July, and their load factors also slipped marginally. The carrier group transported just under three million passengers last month. In contrast, both SIA and Scoot flew slightly more than three million passengers in July. The group passenger load factor hit 88.2 per cent in August, with the full-service carrier and its budget arm posting 87 per cent and 92.1 per cent respectively for the metric that measures the percentage of available seating capacity filled by paying passengers.

Meta Health has been awarded S$1.4 million in damages and costs amid its ongoing lawsuit against a former executive of its subsidiary. Of that sum, about S$1.3 million will be payable with interest at 5.33 per cent per annum from the date the originating claim was filed. Legal proceedings opened on May 17 this year against Vasanthan Metupalle, the former chief medical officer of Meta’s subsidiary, 5Digital, along with other entities that are not part of Meta Health. These entities include 1Life Healthcare and Aventres Enterprise.

US

Apple’s new iPhone 15 Pro quickly saw initial delivery times slip well into November as the new flagship device went on sale for pre-orders on Friday (Sep 15), suggesting strong demand for the most-expensive models. Four iPhone 15 models became available for pre-order on Friday in several countries. The high-end Pro Max model, which starts at US$1,199, saw its first deliveries slip from Sep 22 to as late as mid-November in the US after pre-orders began at 5 am in California. Orders for the blue and block iPhone Pro Max models saw delays as late as Oct 16, while the natural and white models were delayed to Nov 13. Delays affected all storage capacities of the iPhone 15 Pro Max.

TSMC has told its major suppliers to delay the delivery of high-end chipmaking equipment, as the world’s top contract chipmaker grows increasingly nervous about customer demand, two sources familiar with the matter said. Shares in TSMC suppliers including Dutch-based ASML declined following the Reuters report. The instruction by TSMC, which is grappling with delays at its US$40 billion chip factory in Arizona, is aimed at controlling costs and reflects the company’s growing caution about the outlook for demand, the sources said. Suppliers currently expect the delay to be short-term.

US grocery delivery app Instacart on Friday (Sep 15) raised the proposed price range for its initial public offering (IPO), revising its terms to target a fully-diluted valuation of up to US$10 billion a day after a smooth debut from chip designer Arm Holdings. The price hike signals robust investor demand for San Francisco-based Instacart, which is looking to finally list its shares this month after years of waiting in the wings. Instacart is now seeking to sell 22 million shares at US$28 to US$30 each. It was earlier aiming to sell those shares priced between US$26 and US$28 each.

Walt Disney has held exploratory discussions about selling its US TV network ABC to regional TV station operator Nexstar Media Group Inc. Media entrepreneur Byron Allen has also submitted a US$10 billion bid to acquire ABC, local stations and the FX and National Geographic cable channels. The discussions come after Disney CEO Bob Iger said in July the company could sell some of its traditional TV assets, which have struggled for years due to the rise of streaming services.

TikTok plans to offer steep holiday discounts in a month-long campaign that will begin in late October. The social media app aims to lure inflation-battered shoppers to its new online marketplace, taking the first shot in a price war with established competitors Amazon and Walmart. TikTok, owned by Beijing-based ByteDance, is hosting training sessions next week with merchants selling on its marketplace. It is offering to subsidise discounts of as much as 50 per cent to entice sellers’ participation in its Black Friday programme, which begins Oct 27 and runs through Nov 30, according to the documents. The company is betting that the busy holiday period will be a key time to stand out with discounts that compel shoppers to spend money on its new marketplace, which recently launched to US users of its app.

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

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