DAILY MORNING NOTE | 21 September 2023

Singapore shares ended Wednesday (Sep 20) little changed, after paring losses during the day. It inched up 0.04 per cent, or 1.25 points, to 3,242 points at the closing bell. Across the broader market, decliners beat gainers 259 to 250. Some 1.2 billion securities with a total value of S$762.2 million were transacted. In contrast, key indices in the region were mostly a sea of red. After its meeting this week, the US Federal Reserve will release a summary of economic projections together with its decision on policy rates. Peggy Mak, research manager at Phillip Securities Research, said the market remains on edge with the impending Fed rate decision, and will be scrutinising the central bank’s statement for signs of weakness in the United States economy.

Wall Street stocks slumped on Wednesday after the Federal Reserve kept interest rates unchanged, but signalled it could lift rates again this year. The Dow Jones Industrial Average finished down 0.2 per cent at 34,440.88. The broad-based S&P 500 shed 0.9 per cent to 4,402.20, while the tech-rich Nasdaq Composite Index tumbled 1.5 per cent to 13,469.13. The Fed decision, which was in line with expectations, postpones another immediate painful rise in the cost of mortgages and other loans. In a press conference, Fed Chair Jerome Powell offered a positive assessment of US consumer health and the labour market, an outlook that keeps alive the chance of averting recession. But this also likely means that interest rates will remain higher for longer.

Top gainers & losers

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EVENTS OF THE WEEK

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SG

Singapore’s international visitor arrivals slipped to 1.31 million in August, as inbound travel tapered off due to seasonal tourism demand. August’s reading was slightly down from the 1.42 million recorded in July, based on Singapore Tourism Board’s latest data released on Wednesday (Sep 20). It is also slightly less than double the 728,744 visitors recorded in August 2022. In August, China retained its spot as the top source of visitors to Singapore, with 214,491 tourists visiting the country. This was slightly less than the 231,328 Chinese tourists in the previous month. Indonesia was the next-largest source country, from which 167,853 visitors hailed in August. This was down from 229,886 travellers in July. Malaysia climbed to clinch third position in August, with 87,895 tourists, up from 84,876 in the preceding month. India and Australia took the fourth and fifth spots, with 83,556 and 80,377 visitors, respectively. This was fewer than the 93,054 travellers from India and 98,406 from Australia the previous month.

A new cyber-incident training programme for Singapore’s small and medium-sized enterprises (SMEs) was launched on Wednesday (Sep 20) by Singtel, to equip business owners with the knowledge and legal understanding to handle cyberattacks. The Cyber Elevate Programme is a two-day workshop run by the telco’s Cyber Security Institute. There is no limit on the number of SMEs that can participate, nor on the number of employees each business can send. Eligible SMEs can join the programme with a fee subsidy of up to 90 per cent, funded by SkillsFuture Singapore. After subsidies, the fee will be a maximum of S$3,000. Larger companies can also participate in the workshop, but they will receive smaller subsidies.

The price of certificate of entitlement (COE) for cars as well as in the Open category hit record highs in the latest tender exercise that closed on Wednesday (Sep 20). The COE premium for cars with engines that are smaller than 1,600 cc and less power than 130 bhp, as well as electric vehicles (EVs) with not more than 110 kilowatts, was 3.96 per cent higher at S$105,000, up from S$101,000 set at the last tender exercise. The previous high for smaller car COE was S$103,721. The COE premium for larger and more powerful cars and EVs also set a record for the fourth consecutive tender. At S$140,889, it was 4.45 per cent above the previous high of S$134,889 set two weeks ago. The premium for the Open category COE – which can be used for any vehicle type except motorcycles, but ends up mostly for bigger cars – also set an all-time high, at S$144,640. This was 5.58 per cent higher than the S$137,000 record from the last tender exercise.

US

The US Federal Reserve held interest rates steady on Wednesday but stiffened its hawkish stance, with another rate increase projected by the end of the year and monetary policy kept significantly tighter through 2024 than previously expected. As they did in June, Fed policymakers at the median still see the central bank’s benchmark overnight interest rate peaking this year in the 5.50 to 5.75 per cent range, just a quarter of a percentage point above the current range. But from there the Fed‘s updated quarterly projections show rates falling by only half a percentage point in 2024 compared to the full percentage point of cuts anticipated at the meeting in June. With the federal funds rate falling to 5.1 per cent by the end of 2024 and 3.9 per cent by the end of 2025, the central bank’s main measure of inflation is projected to drop to 3.3 per cent by the end of this year, to 2.5 per cent next year and to 2.2 per cent by the end of 2025. The Fed expects to get inflation back to its 2 per cent target in 2026, which is later than some officials had thought possible. “Inflation remains elevated,” the rate-setting Federal Open Market Committee (FOMC) said in a policy statement that included projections incorporating stronger economic and job growth than prior forecasts, and keeping prospects for a “soft landing” squarely in view.

A Huawei Technologies unit is shipping new Chinese-made chips for surveillance cameras, in a fresh sign the Chinese tech giant is finding ways around four years of US export controls. The shipments to surveillance camera manufacturers from the company’s HiSilicon chip design unit started this year, according to one of the sources, and a third source familiar with the industry supply chain. One of the sources briefed on the unit said at least some of the customers were Chinese. Huawei also unveiled new smartphones in recent weeks that use advanced chips, which analysts say are domestically made. The developments indicate the Chinese tech giant is overcoming Washington’s export controls, which since 2019 have barred it from obtaining components and technology from US firms without approval.

Britain’s high inflation rate unexpectedly fell in August, official data showed on Wednesday (Sep 20), raising questions about how much higher the Bank of England (BOE) will take interest rates a day before its next policy announcement. The consumer price index dropped to 6.7 per cent from July’s 6.8 per cent, confounding forecasts by economists polled by Reuters and the BOE for an increase. The surprise drop in inflation to its lowest since February 2022 pushed sterling to its lowest against the US dollar since May. The pound also fell against the euro, as investors scaled back bets on future rate hikes by the BOE. The Office for National Statistics said the fall was driven by a drop in hotel prices and airfares – which are often volatile – and by food prices rising by less than at the same time last year. That offset a jump in fuel prices and an increase in a tax on alcoholic drinks.

Unions at Apple’s stores in France have called for a strike on Friday (Sep 22) and Saturday, when the iPhone 15 is due to be launched, demanding better pay and working conditions. Apple unions including CGT, Unsa, CFDT and Cidre-CFTC have asked for a 7 per cent wage increase to compensate for inflation, and an end to a months-long hiring freeze. Management did not want to offer more than a 4.5 per cent hike, union officials said. Apple France did not return a request for comment.

Qualcomm on Wednesday (Sep 20) said it was getting into a new market for Wi-Fi routers and that Charter Communications and the UK’s EE will be among its first customers. San Diego, California-based Qualcomm is the world’s biggest supplier of the chips that help mobile phones connect to cellular data networks, but it has also long had a business selling Wi-Fi chips for consumer Wi-Fi routers. The company said on Wednesday it is getting into a new segment of that market by selling what are known as gateways, a device often supplied by broadband carriers where a physical fibre-optic line from a carrier enters the home and is transformed into a Wi-Fi signal. EE and Charter, which goes by the name Spectrum in the broadband market, said they will both use routers from Qualcomm starting next year. The new devices will use a new standard called Wi-Fi 7 that is designed to help data flow faster around homes where scores of devices from phones to smart televisions often use Wi-Fi.

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


RESEARCH REPORTS

Phillip Macro Update – Key Points for September FOMC Meeting

Analyst: Shawn Sng

1. A halt on interest rate – In this FOMC meeting, the U.S. Federal Reserve (Fed) committee members have voted unanimously to maintain the benchmark federal funds rate at the range of 5.25% – 5.50% and this decision to leave its policy interest rate unchanged was in line with market expectations.

2. Gradual moderation observed but inflation still persists – Data points such as the Consumer Price Index (CPI) and Personal Consumption Expenditure (PCE) have continued to portray signs of slowing down within the economy with the latest August headline CPI coming in at 3.7% Y.o.Y and Core CPI at 4.3% Y.o.Y.

3. Federal Reserve Projection/Guidance – A dot plot graph was released in this meeting, and according to the plotted graph and 12 of the 19 committee members assessed that the central bank benchmark rate would be peaking in the range of 5.5% – 5.75%, while 5 members indicated the rate to remain unchanged for the rest of the year.

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