Daily Morning Note – 21 June 2021
Asian stocks are set to start the week lower as investors assess whether last week’s post-Federal Reserve rotation away from the reflation trade will continue. Currencies were steady early Monday.
U.S. stocks tumbled for a fourth day on Friday after the central bank’s surprise hawkishness, and commodities such as copper slumped while the dollar touched a two-month high. The S&P 500 had its worst week since February. Bonds advanced, sending 10-year yields down around 1.44%, oil gained and gold retreated. Futures were lower in Japan, Australia and Hong Kong.
Bitcoin dropped over the weekend amid a focus on Chinese mine closures and potential regulatory scrutiny. The digital coin was trading just below $36,000 early Monday.
Engineering and agriculture company Advanced Holdings is looking to transfer its listing from the Singapore Exchange’s (SGX) mainboard to the Catalist board. Its directors believe the group’s current business, market capitalisation of about S$11.1 million, and risk profile better resemble those of Catalist-listed companies, which typically target “more inorganic growth”. The proposed move will also provide the company with a more suitable platform to implement its strategic objectives, the company said in an exchange filing on Friday evening.
Temasek Holdings will again take up the lion’s share of Singapore Airlines’ (SIA) mandatory convertible bonds (MCBs), with the second tranche being undersubscribed. The flag carrier received valid acceptances and excess applications for S$3.76 billion in principal amount of the rights MCBs, representing just 60.6 per cent of the S$6.2 billion available under the rights issue. This included S$3.43 billion taken up by SIA: C6L +1.2% controlling shareholder Temasek and its wholly-owned subsidiary Napier Investments under their pro-rata entitlement to the MCBs in the rights issue. That made up slightly more than half of the total principal amount available. The balance S$2.44 billion that was unsubscribed, representing 39.4 per cent of the total amount of rights MCBs, will also be mopped up by a Temasek unit.
ISDN Holdings is partnering Singapore-based wireless communications provider Whizpace to deliver wide-area Industry 4.0 and Internet of Things (IoT) solutions globally. This strategic partnership will extend the reach of ISDN’s industrial-automation solutions into “exciting frontiers” where intelligent devices can be connected over wide spaces such as farms, oil fields, ships, forests, transport pipelines, utility grids and mines, it said. The mainboard-listed company’s solutions are used in sectors including semiconductors, Industry 4.0 intelligent manufacturing, medical devices, aerospace and clean energy.
Malaysian offshore support vessel builder Nam Cheong, which is trying to restructure its debts to “ride out this incredibly challenging market environment”, on Friday said its board is still unable to confirm the group’s ability to continue as a going concern. In response to the Singapore Exchange’s (SGX) queries, Nam Cheong noted that the group’s current assets of RM266 million (S$86.2 million) in Q1 2021 are “unlikely to adequately meet” its short-term liabilities of RM1.38 billion during the quarter. This was a result of the depressed utilisation of vessels and realisable value of the group’s vessels, which are operating in the challenging oil and gas industry, it said on Friday.
The parent company of Philippine Airlines booked a record 73 billion pesos (S$2.02 billion) loss in 2020, up seven-fold from a year earlier, after the Covid-19 pandemic lashed the global aviation sector. In a disclosure, PAL Holdings Inc said it is in the final stages of putting together a debt restructuring plan for the flag carrier to help it through the crisis. Several other South-east Asian airlines have already agreed restructuring plans or have sought approval for capital infusions and court-assisted debt relief.
A flaw in the dental industry lies in how some dentists prescribe treatment plans simply because they prefer certain procedures. This comes at the expense of patients, said Ng Chin Siau, chief executive of Q&M Dental Group. In 2018, Q&M established a company, EM2AI, to work on artificial intelligence (AI) projects that target pain points such as this. EM2AI is now preparing for clinical trials to get approval from the Health Sciences Authority for its AI platform, under the Class B medical device category. The new AI platform is meant to reduce the chance of misdiagnoses, and recommend treatment plans in a more objective and transparent way.
The Federal Reserve unleashed a huge repositioning in global financial markets, as investors reacted to a world where the U.S. central bank is no longer guaranteeing its policies will be dovish — or easy.nThe dollar surged the most in a year over a two-day period against a basket of currencies. Stocks were mixed around the world on Thursday, as were bond markets. Many commodities sold off. The Nasdaq Composite was higher, while the S&P 500 and Dow Jones Industrial Average slid. Tech gained, and cyclical stocks fell.
Flexport CEO Ryan Petersen told CNBC on Friday there’s no single fix to resolve the shipping delays that have disrupted the global economy. That’s because one key reason they are happening — consumers buying more physical products during the Covid pandemic as they spent less on services — will not revert right away, Petersen said in a “Mad Money” interview. “The real, probably, solution here is: Wait it out. No one likes to hear that,” said Petersen, whose company is a freight forwarder that uses cloud computing and machine learning to help modernize the global shipping industry. Privately held Flexport was No. 41 on CNBC’s Disruptor 50 in 2021.
Computer scientists are questioning whether DeepMind, the Alphabet-owned U.K. firm that’s widely regarded as one of the world’s premier AI labs, will ever be able to make machines with the kind of “general” intelligence seen in humans and animals. In its quest for artificial general intelligence, which is sometimes called human-level AI, DeepMind is focusing a chunk of its efforts on an approach called “reinforcement learning.” This involves programming an AI to take certain actions in order to maximize its chance of earning a reward in a certain situation. In other words, the algorithm “learns” to complete a task by seeking out these preprogrammed rewards.
Amazon sellers who had hoped for an easier Prime Day after 2020’s pandemic-driven chaos aren’t likely to catch a break this year. The company’s two-day discount bonanza kicks off on Monday. It’s coming as the retail industry is grappling with widespread supply chain issues that are making it more challenging to stock stores and distribution centers and keep up with consumer demand. Several cascading issues are hitting businesses at once. The global supply chain is still feeling the ripple effects of the Covid-19 pandemic, which forced many factories to shut down temporarily amid worsening outbreaks of the virus. Supply chains have been further disrupted by shortages of shipping containers and air freight capacity, along with materials like semiconductors and plastics. Labor shortages have caused major backlogs throughout the system.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
Ascendas REIT – Rebalancing continues
Recommendation: BUY (Maintained), Last Done: S$2.92, Target Price: S$3.65, Analyst: Natalie Ong
– Portfolio stable. Slight dip in occupancy from 91.7% to 90.6% due to non-renewals but reversions positive at 3.0%. Singapore assets improving.
– Demand remains muted as companies exercise caution but tenants also avoid relocation costs, leading to higher retention rates for AREIT. Electronics (29.3%) and Biomedical (34.0%) sectors main sources of demand in 1Q21.
– Reiterate BUY. DDM TP (COE 6%) raised from S$3.64 to S$3.65. We adjust FY21e/22e DPU by -0.5%/0.8% to reflect acquisition of remaining stake in Galaxis and divestment of three Australian logistics assets. Forecast FY21e DPU growth of 9.2% as acquisitions and redevelopment/AEI start contributing. AREIT remains our top pick in the sector for its scale and diversification.
SG Bonds Weekly – Week 25
Credit Analyst: Timothy Ang
– Hawkish US Federal Reserve comments post last week’s FOMC meeting caused US Treasury yield curve steepening.
– Asian primary bond market sentiment was dampened by the slippage on Wall Street.
– 2 outstanding mandates remain from last two weeks.
HK Reports – Read up on our Hong Kong reports here
Webinar Of The Week
Date: 14 June 2021
Updates summarised in 3 minutes
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