Daily Morning Note – 2 December 2021

PHILLIP SUMMARY

Asian stocks look set to fall Thursday after a sharp reversal in U.S. shares on concerns about risks from the omicron strain and as Jerome Powell reiterated a pivot toward potentially tapering stimulus more quickly.

Australian equities dropped and futures for Japan and Hong Kong pointed lower, while U.S. contracts edged up. The S&P 500 posted its worst two-day selloff since October 2020 after erasing a near-2% rally to slide into the close. The technology-heavy Nasdaq 100 underperformed.

Markets were jolted by the first confirmed U.S. case of the new variant, whose emergence has brought fresh challenges for economic reopening. At the same time, Federal Reserve Chair Powell reiterated officials should consider a quicker reduction of monetary stimulus amid elevated inflation.

The 30-year Treasury yield fell to its lowest level since January. Risk aversion bolstered the dollar. An index of Chinese shares traded in the U.S. slid as Beijing’s plan to close a loophole tech firms use to list abroad hit sentiment.


BREAKING NEWS

SG

Tech unicorn Grab is slated to make its Nasdaq debut on Dec 2 as the special purpose acquisition company (SPAC) it plans to merge with, Altimeter Growth Corp (AGC), has received shareholders’ approval for the transaction. Following the close of the business combination, Grab’s Class A common stock is expected to begin trading on Thursday under the ticker symbol “GRAB.” Shareholder redemptions were effectively 0%, at 0.02%. Complete official results of the vote and shareholder redemption will be included in a Current Report on Form 8-K to be filed by AGC with the Securities and Exchange Commission, the company said in a statement.

Singapore Press Holdings (SPH) on Wednesday (Dec 1) night announced that its media business restructuring has been completed. In a bourse filing, SPH said its entire media-related business, including 2,500 employees, have been transferred to SPH Media Trust (SMT), a not-for-profit company limited by guarantee (CLG), for a nominal consideration of S$1. Following the completion, SPH will no longer have to meet the requirements imposed on newspaper companies under the Newspaper and Printing Presses Act in Singapore. SPH said it has also effected the proposed adoption of the new constitution of the company, and the proposed conversion of management shares into ordinary shares, on Wednesday.

Communications network specialist Ntegrator International has secured a S$8.6 million contract extension from a regional telecom provider for pipe installation and maintenance works in eastern, northern and western Singapore. This deal adds to its order book of S$65.9 million as at Jun 30, 2021, said the Catalist-listed group in a bourse filing on Wednesday (Dec 1). The contract extension will commence in April 2022 and is expected to be completed by September 2022. The group said it had already been working on a similar project in the eastern region of Singapore with the same customer. The scope of the contract extension includes provision of labour for pipe laying works and project management services, with all related agencies and other contractors for mill and patch.

Local telco M1, through its indirect subsidiary AsiaPac Technology, will acquire up to 70 per cent stake in Malaysia-based Glocomp Systems and its 2 affiliate companies for RM111 million (S$36 million) as part of M1’s continued expansion into the cloud services business. The deal will see Global Computing Solutions (GCS) and GCIS restructured as subsidiaries of Glocomp and managed by a unified management team, said M1 in a statement on Wednesday (Dec 1). The remaining 30 per cent stake in Glocomp will continue to be held by its founders. Collectively, the Glocomp group are information and communications technology (ICT) solution providers with solutions in areas of cybersecurity, enterprise systems and multi-cloud infrastructure.

Cuscaden Peak said on Wednesday (Dec 1) that the $34 million break fee payable to Keppel Corporation would be “indirectly borne” by the consortium if it prevails in its takeover bid for Singapore Press Holdings (SPH). It noted that if the Cuscaden scheme succeeds and the break fee is payable by SPH, “since Cuscaden will own 100 per cent of SPH, the break fee will, in turn, at that stage be indirectly borne by Cuscaden”, it said in an exchange filing. This means the break fee will not come out of the pockets of SPH shareholders if the Cuscaden offer succeeds, added the consortium, which is backed by businessman Ong Beng Seng’s Hotel Properties and two Temasek-linked entities – CLA Real Estate and Mapletree Investments. Cuscaden’s statement follows a Straits Times report on Nov 25 which noted that the consortium was prepared to cover the break fee if shareholders reject the Keppel scheme.


US

US manufacturing activity picked up in November amid strong demand for goods, keeping inflation high as factories continued to struggle with pandemic-related shortages of raw materials. The Institute for Supply Management (ISM) said on Wednesday its index of national factory activity increased to a reading of 61.1 last month from 60.8 in October. A reading above 50 indicates expansion in manufacturing, which accounts for 12 per cent of the US economy. Economists polled by Reuters had forecast the index rising to 61.0. Global economies’ simultaneous recovery from the Covid-19 pandemic, fuelled by trillions of dollars in relief money from governments, has strained supply chains, leaving factories waiting longer to receive raw materials.

Private US companies added 534,000 workers in November, payroll services firm ADP reported Thursday. The figure follows an increase of 570,000 in October, reflecting continued gains across the economy but especially by services firms. It previews an expected hiring surge in official government data due out Friday. “The labour market recovery continued to power through its challenges last month,” ADP chief economist Nela Richardson said noting that the gains over the past three months averaged 543,000. The services sector, which dominates the US economy, added 434,000 jobs, with 136,000 in the leisure and hospitality sector that took the biggest hit from the pandemic shutdowns, according to the report. Goods-producing companies added 110,000 workers, with 50,000 in manufacturing – a sector President Joe Biden has made a priority.

Gold edged higher on Wednesday (Dec 1), hovering close to a 1-month low, after the US Federal Reserve Chair Jerome Powell said the central bank would discuss ending its bond purchases sooner. Spot gold rose 0.1 per cent to US$1,775.85 per ounce by 2.11 am GMT, only US$2 shy of Tuesday’s (Nov 30) last recorded price which was the lowest since Nov 4. US gold futures was steady to US$1,776.60. Powell said the Fed will discuss whether to end their bond purchases a few months earlier than previously anticipated in December and the word “transitory” is no longer the most accurate term for describing the nature of current inflation.

Crude oil futures settled lower on Wednesday, as an early rally fizzled and selling intensified on worries the Omicron variant of coronavirus could cut oil demand as global supply builds. Late in the session, oil prices dropped into negative territory after US officials said the Omicron variant – believed more transmissible than previous strains of coronavirus – had been found in the country. “When the markets gets hit with news about Frankenstein variants, you’re selling and asking questions later,” said John Kilduff, partner at Again Capital LLC in New York, said he expects more bullish momentum to return whenever WTI crosses above US$70 a barrel. WTI US crude futures settled down 61 cents, or 0.9 per cent, at US$65.57 a barrel. During the session, they were up as much as 4 per cent. Global benchmark Brent crude was down 36 cents, or 0.5 per cent, at US$68.87 a barrel.


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

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