DAILY MORNING NOTE | 21 July 2023

Market Trend Analysis – Topic #7 – Little Evidence Tactical Indicators are Lead Indicators for S&P 500 in last decade

Analyst: Zane Aw

-Investors often pay attention to tactical indicators for insights on stock market greed and fear behaviour to time possible entries and exits. This report looks at the relationship between each of these indicators and the S&P 500, to find out if they can be lead indicators for market direction

– The CBOE Equity Put/Call Ratio, AAII Sentiment Survey Bull-Bear Spread and CBOE VIX indicators are more useful to estimate market rebounds than market peaks. As coincidental indicators which move together with the market, they also come with the limitation of not being able to act as lead indicators

– The preferred tool to look at for estimating market rebounds appears to be the CBOE Equity Put/Call Ratio as the extreme level of above 0.80 has been consistent with market rebounds even during periods of high volatility and extreme fear such as the 2020 Covid market crash

Singapore shares ended largely unchanged on Thursday (Jul 20), losing 0.03 per cent or just 0.86 point to close at 3,274.38. Thinly-traded Isetan was the top gainer, rising 5.2 per cent or S$0.15 to close at S$3.05. Keppel Corporation shares also gained 1.5 per cent or S$0.10 to S$6.96. Jardine Cycle and Carriage was the biggest loser on Thursday, falling 1.2 per cent or S$0.40 to S$33.40. Two of the three local lenders were also among the top decliners. UOB lost 0.8 per cent or S$0.22 to S$28.42, while DBS fell 0.6 per cent or S$0.19 to S$32.55. OCBC too fell, but by a more muted 0.2 per cent or S$0.03 to S$12.64. Seatrium was the most actively traded counter by volume on Thursday, with about 620.2 million shares traded. The counter rose 3.5 per cent or S$0.005 to S$0.147.

The Nasdaq tumbled Thursday (Jul 20) on selloffs in Netflix and Tesla following mixed earnings, even as the Dow rose for the ninth straight session. The Dow Jones Industrial Average finished at 35,225.18, up 0.5 per cent, extending a rally. The broad-based S&P 500 fell 0.7 per cent to 4,534.87, while the tech-rich Nasdaq Composite Index dropped 2.1 per cent to 14,063.31.

SG

Grab has acquired Singapore taxi operator Trans-cab. Grab announced the signing of an agreement on Thursday (Jul 20), where its subsidiary Grab Rentals acquired 100 per cent of the shares of Trans-cab. Trans-cab representatives did not reveal the cost of the buyout. The agreement includes Trans-cab’s taxi and vehicle rental business, its 2,500-vehicle fleet as well as its maintenance workshop and fuel pump operations.

Keppel Corporation on Thursday (Jul 20) said its private funds acquired the Bank of Korea’s Sogong Annex Facility, located in Seoul’s Central Business District (CBD). The move brings the conglomerate’s South Korean portfolio to 2.6 trillion won (S$2.6 billion). The acquisition was made by Keppel Asia Macro Trends Fund IV and a co-investment programme committed by a Korean financial institution, Keppel said. Each fund will hold a 50 per cent effective interest in the property. When asked about the amount paid for the building, a Keppel representative said the consideration could not be disclosed due to confidentiality agreements. Keppel does not expect the latest transaction to have any material impact on its earnings per share and net tangible assets per share for the current financial year.

Yangjiziang Financial Holding’s maritime private equity fund has invested in two chemical and product tanker projects for US$32.1 million. The fund – Yangzijiang Maritime Private Equity Fund #2 – has also entered into an agreement to co-charter for eight eco-medium-range chemical and product tankers for a period of less than a year for each vessel. The two tankers the fund has invested in are RT Star, for a subscribed investment amount of US$19.5 million, and OM Shanghai, for US$12.6 million. To date, the maritime fund has committed US$178.8 million in funding and has invested a sum of US$82.8 million.

Lian Beng is expected to report lower profits for the full year ended May 31, as its subsidiary is expected to record a loss for the second half of its fiscal year. SLB Development, the subsidiary, had announced in a separate profit guidance issued on Thursday (Jul 20) evening that it was expecting to report a loss for the six months ended May 31. The poorer performance was mainly due to higher finance costs and lower revenue recognised from its property development projects; this was because the revenue from these projects was largely recognised before FY2023 as the projects progressed, the company said in a bourse filing. Further details of the group’s financial performance will be disclosed in SLB’s unaudited financial results for FY2023, to be released on Jul 29.

Intraco Limited says it expects to report a net profit before tax for the 1HFY2023 ended June 30 based on a preliminary review of the unaudited management accounts and the information of the company currently available. The anticipated turnaround of the company’s results, from a net loss before tax in 1HFY2022, is mainly due to better management of its balance sheet and cost savings arising from cost management initiatives. Intraco also wrote back some provisions previously made in the financial year ended 31 December 2022. The company has advised that further details of its performance will be set out in its unaudited financial results for 1HFY2023, to be released on or before Aug 7.

US

The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing to persistent strength in the labour market. Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 228,000 for the week ended Jul 15, the Labor Department said on Thursday (Jul 20). Economists had forecast 242,000 claims for the latest week. Though the labour market remains tight, last week’s decline was said to be likely exaggerated by difficulties adjusting the data for seasonal patterns. Claims, relative to the size of the labour market, are way below the 280,000 level that economists say would signal a significant slowdown in job growth.

American Airlines reported blowout second-quarter earnings on Thursday (Jul 20), benefiting from continually strong consumer demand and lower jet fuel costs. Profits were nearly triple the year-ago level at US$1.4 billion, while revenues rose 4.7 per cent to US$14.1 billion, a record. Results were boosted by a retreat in jet fuel prices, which were down 35 per cent from the year-ago level.

Taiwan Semiconductor Manufacturing Co (TSMC) posted a smaller than expected profit decline as demand for consumer electronics continues to slump. The chipmaker reported net income of NT$181.8 billion (US$5.9 billion) for the June quarter, versus the average analysts’ estimate of NT$173.6 billion. Despite reporting consensus-beating sales in Q2 of NT$480.8 billion (vs est. NT$478.8 billion), and a swift rise in AI chip-related fabrication orders, TSMC’s earnings trajectory in H2 could still be significantly dragged down by a sluggish smartphone sector. After adjusting for foreign-exchange fluctuations, Q2 revenue stands at just the midpoint of the guidance range, and 10 per cent lower than a year earlier. TSMC forecast third-quarter revenue between US$16.7 billion and US$17.5 billion. The company’s executives also reaffirmed projections for a low to mid-single-digit revenue decline in 2023.

Apple is reportedly working on artificial intelligence (AI) offerings similar to OpenAI’s ChatGPT and Google’s Bard. The company is said to have built its own framework, known as “Ajax”, to create large language models (LLMs) and is also testing a chatbot that some engineers call “Apple GPT”. Apple’s new virtual assistant summarizes text and answers questions based on data it has been trained with, and is being used internally for product prototyping. Employees say the tool essentially replicates Bard, ChatGPT and Bing AI, and works as a web application. Apple does not yet have a concrete plan for the tools it is developing, but it is reportedly aiming to make a significant AI-related announcement next year.

YouTube, Google’s video streaming platform, hiked prices on its monthly and annual premium plans in the United States for the first time since the subscription service was launched in 2018. The YouTube Premium plan would cost US$13.99 a month in the US, up US$2 from before, according to the company’s website on Thursday (Jul 20). The price for its annual plan was hiked by US$20 to US$139.99.

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

RESEARCH REPORTS

PSR Stocks Coverage

For more information, please visit:

https://www.stocksbnb.com/singapore-stocks-coverage/