Daily Morning Note – 21 October 2021
Asian stocks looked set for a steady start Thursday after a mixed Wall Street session, as investors weighed corporate earnings, elevated inflation and risks from China’s property sector.
Australian shares edged up, while futures for Japan and Hong Kong were little changed and U.S. contracts wavered. The S&P 500 rose to the cusp of a record but the tech-heavy Nasdaq 100 dipped. Tesla Inc.’s revenue fell short of estimates but third-quarter profit beat projections despite semiconductor and supply-chain challenges.
In Treasuries, long-end yields climbed in part on a soft 20-year auction, while two-year yields dropped as traders reassessed rate-hike prospects.
The dollar held a drop, crude oil pushed higher and Bitcoin was around $66,000 after setting an all-time high. Traders will be monitoring cash-strapped developer China Evergrande Group, which terminated talks to sell its property-management arm and asked for its shares to resume trading.
Mapletree Logistics Trust (MLT) is acquiring a 2-year-old logistics facility in South Korea for 135 billion Korean won (S$153.8 million) to boost its strength in the e-commerce market. The property, Yeoju Logistics Centre, spans over 70,400 square metres in total gross floor area and sits on 56,200 sq m of freehold land. It has 2 blocks of 3-storey dry warehouses and is fully leased to one of South Korea’s largest online fashion platforms and a domestic third-party logistics service provider. “With a weighted average lease expiry (by net lettable area) of approximately 3.1 years and built-in annual rent escalations, the acquisition will provide MLT with a stable and growing income stream,” the manager said.
Manhattan Resources has entered into a sale and purchase agreement with renewable energy platform Athena Energy in a bid to augment its power business. The mainboard-listed coal-shipping group will purchase Athena for a consideration of S$4.8 million, with S$4.3 million to be paid in cash and the remaining S$553,700 in new ordinary shares. The shares will be priced at S$0.039 per share, representing a 4.2 per cent discount to the weighted average price of shares traded on Oct 19. Athena is currently valued at between S$4 million and S$6.1 million.
Singapore’s Stabilisation Phase, originally meant to end after Oct 24, will be extended by four weeks until Nov 21, with an additional S$640 million support package on the way to help companies and individuals, the multi-ministry taskforce on Covid-19 announced on Wednesday (Oct 20). “We have explained earlier that we can relax the restrictions only if the pressure eases off on the healthcare system,” said taskforce co-chair and Finance Minister Lawrence Wong. While the government is beefing up manpower and capacity, it will take time for these reinforcements to come in, and in the meantime, Singapore faces “considerable risk of the healthcare system being overwhelmed”, he said. Therefore, the current Stabilisation Phase, which began on Sep 27 and includes measures such as the two-person cap on social gatherings and dining at food and beverage (F&B) establishments, will be extended for a month, he said.
The dollar held steady on Wednesday, after an improvement in global risk appetite saw riskier currencies gain and the safe-haven yen hit a four-year low against the dollar overnight. European stock indices were mostly up and the US 10-year Treasury yield rose to a five-month high overnight, helped by rising optimism about the global economy and corporate earnings. Reduced demand for safe-haven assets saw the dollar hit a four-year high of 114.695 versus the yen overnight. But by 1044 GMT the dollar was up just 0.1 per cent against the yen, at 114.470 . In a quiet day for currency markets, the dollar index was steady at 93.819, having fallen since it hit a one-year high of 94.563 last week on expectations that the US Federal Reserve would tighten policy more quickly than previously expected. Traders had priced in a tapering of Fed stimulus as soon as next month, followed by rate hikes next year.
Semiconductor giant Micron Technology intends to invest more than US$150 billion (S$201 billion) globally over the next decade to drive memory manufacturing as well as research and development. Its investment will address increasing global demand for memory which is essential to all computing, it said on Wednesday (Oct 20). Micron’s announcement comes amid a global chip shortage that has disrupted production of various goods, including cars, smartphones and medical equipment. Memory chips account for about 30 per cent of the global semiconductor market, Micron chief business officer Sumit Sadana told Reuters.
Wework’s financial woes and aborted initial public offering (IPO) made headlines in 2019, but two years later the office-sharing giant is returning to Wall Street after seeking to renew itself in response to the pandemic. Shareholders from a special-purpose acquisition company, or SPAC, called BowX voted on Tuesday (Oct 19) to merge with WeWork, which will finally make the start-up a publicly-traded company. Shares of the new entity, worth US$9 billion, are expected to begin trading on Thursday (Oct 21) on the New York Stock Exchange under the ticker symbol “WE”. WeWork hopes to turn the page on the era of Adam Neumann, the co-founder and ex-boss whose antics and temperamental nature brought the company to the brink of bankruptcy. The move comes 2 years after the company went into a spectacular tailspin that led to the cancelling its planned IPO and accepting a bailout by Japanese investment firm SoftBank.
Oil prices rallied on Wednesday after US crude inventories at the nation’s largest storage site hit their lowest level in three years and nationwide fuel stocks fell sharply, a signal of rising demand. Brent crude futures settled at US$85.82 a barrel, a gain of 0.9 per cent or 74 cents and the highest since October 2018. November US West Texas Intermediate (WTI) crude, which expires on Wednesday, settled at US$83.87, up 91 cents, or 1.1 per cent. The more active WTI contract for December settled up 98 cents to US$83.42 a barrel. Crude prices have risen as supply has tightened, with the Organization of the Petroleum Exporting Countries maintaining a slow increase in supply rather than intervening to add more barrels to the market, and as US demand has ramped up.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
Technical Pulse: Kingsoft Corp Ltd
Recommended: Technical buy; Analyst: Chua Wei Ren
Kingsoft Corp (HKEX: 3888) will see a rise to the upside after technicals indicate a potential accumulation signs between September and October period.
Buy spot: 34.60 Stop loss: 25.70 Take profit 1: 47.45 Take profit : 52.15
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