Daily Morning Note – 22 April 2022
Stocks and bonds are set to come under pressure in Asia Friday after Federal Reserve Chair Jerome Powell toughened his stance on inflation, spurring traders to brace for more aggressive monetary-policy tightening.
Equity futures for Japan, Australia and Hong Kong fell, while U.S. contracts wavered, after the energy and technology sectors led a slide on Wall Street.
Shorter maturities paced a renewed selloff in Treasuries on the prospect of three consecutive half-point Fed interest-rate hikes, which would be the sharpest tightening since 1982. Powell signaled increases of such increments are possible and found merit in the idea of “front-end loading” moves.
A portion of the Treasury yield curve inverted again. That indicates worries about whether the Fed’s campaign against price pressures — which have been stoked in part by Russia’s war in Ukraine — will tip the world’s largest economy into a downturn.
The dollar rallied amid the climb in bond yields. In commodities, oil was higher as supply challenges overshadowed demand risks from Covid lockdowns in China. The European Union is seeking to cut dependence on Russian crude in retaliation for the conflict in Ukraine.
Stocks to watch: Keppel Corp
SG
Mainboard-listed Keppel Corp logged higher net profit for the first quarter ended March from a year ago with 3 key segments putting up a better showing, except for urban development. Group revenue grew 9 per cent to S$2.07 billion year on year, led by higher contributions from the energy & environment segment. The other key segments, asset management, and connectivity, also registered improved performance, said Keppel in a Q1 business update on Thursday (Apr 21). The diversified firm’s property development arm, Keppel Land, saw net profit dip in the three-month period owing to lower contributions from China property trading projects and en bloc sales. The urban business was the largest contributor to Keppel’s bottomline in FY2021.
Sabana Industrial Real Estate Investment Trust (Reit) clocked a portfolio occupancy of 85.2 per cent for the first quarter of 2022, just slightly lower than the 85.4 per cent occupancy rate in the previous quarter, said the company in an interim business update provided through a bourse filing on Thursday (Apr 21). It also signed 11,786 square feet (sq ft) of new leases and renewed 208,633 sq ft of leases. Out of the renewed leases, 4 per cent had higher rental rates, achieving positive rental reversion. According to Sabana Reit, this is the eighth quarter over the past 9 quarters where positive reversion was achieved. As for leases due to expire this year, 44.1 per cent has been renewed.
Pure-play data centre real estate investment trust (Reit) Digital Core Reit on Thursday (Apr 21) posted US$12.1 million in first-quarter distributable income, beating its initial public offering (IPO) forecast of US$11.9 million by 1.9 per cent. Gross revenue was 0.1 per cent lower than its IPO forecast, at US$26.5 million, for the first-quarter period. Net property income (NPI) beat its IPO forecast by 6.9 per cent, at US$17.9 million, for the same period. Digital Core Reit’s manager noted in its first-quarter business update that its fifth-largest customer, occupying 2.7MW of capacity in Toronto, has filed for bankruptcy protection.
US
JPMorgan Chase & Co sees greater demand from companies for liquidity because of volatility from Russia’s invasion of Ukraine, the lender’s global head of corporate banking Sjoerd Leenart said. The biggest US bank is talking with a number of clients about incremental fund-raising, while also navigating “very complex” sanctions which are difficult to implement, Leenart said in an interview with Bloomberg Television. “It’s been a very busy period, unwinding transactions and certainly stopping any new business,” he said. “We’ve been talking very actively with clients about what exactly is allowed, what’s not allowed, how to unwind trades, by when, which payments can be made and which payments cannot be made.”
KKR & Co plans to acquire about 90 per cent of Hitachi Ltd’s transportation unit for more than 600 billion yen (S$6.4 billion), including much of Hitachi’s 40 per cent stake, Nikkei reported on Thursday (Apr 21) without citing where it got the information. The private equity firm has been named the preferred bidder to buy Hitachi’s stake, according to the report. Hitachi will reduce its stake in the unit, Hitachi Transport System., to 10 per cent, Nikkei reported. KKR will launch a tender offer once the agreement is reached with Hitachi, and plans to take the unit private, Nikkei said. The companies plan to reach an agreement by Apr 28, when the preferential bidding rights will expire, according to the report.
Blackstone said on Thursday (Apr 21) its first-quarter distributable earnings jumped 63 per cent as a strong performance from its real estate and credit businesses offset a weak showing from its hedge funds unit. The world’s largest manager of alternative assets saw distributable earnings, which represent the cash used to pay dividends to shareholders, rise to US$1.9 billion from US$1.2 billion a year earlier. That resulted in distributable earnings per share of US$1.55, which exceeded the average estimate of US$1.06 per share of analysts compiled by Refinitiv. Blackstone said it changed the way it accounts for the fee-related performance revenue at its real estate income trust business, booking such earnings quarterly rather than annually. That helped to boost its overall earnings beyond what analysts had expected. “This will likely have the effect of making ongoing quarterly fee-related earnings somewhat higher, but also somewhat more volatile,” Oppenheimer analysts wrote in a note to investors on Thursday.
The number of Americans filing new claims for unemployment benefits fell moderately last week, still suggesting that April was another month of strong job growth. Initial claims for state unemployment benefits declined 2,000 to a seasonally adjusted 184,000 for the week ended Apr 16, the Labor Department said on Thursday (Apr 21). Economists polled by Reuters had forecast 180,000 applications for the latest week. An acute shortage of workers is keeping layoffs low. The Federal Reserve’s Beige Book, based on information collected on or before Apr 11 from the US central bank’s contacts, showed on Wednesday that “demand for workers continued to be strong across most districts and industry sectors” but noted “hiring was held back by the overall lack of available workers”.
Goldman Sachs Group’s asset-management arm raised US$3.5 billion for its latest fund dedicated to global real estate investments. Known as West Street Real Estate Investment Partners, the vehicle raised capital from third-party investors alongside commitments from Goldman’s balance sheets and employees, according to a client document seen by Bloomberg. Its goal is to make core-plus or value-add bets with a specific focus on resilient sectors that have favorable long-term growth trends, as well as positive long-term supply-demand dynamics. The fund has deployed more than 50 per cent of its capital so far, mostly on housing, logistics and office properties.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
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Date: 18 April 2022
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