Daily Morning Note – 22 July 2021

PHILLIP SUMMARY

Asian stocks look set to climb Thursday after solid company earnings boosted Wall Street, easing concerns about peak economic growth and coronavirus flareups. The dollar and Treasuries declined.

Futures rose in Australia and Hong Kong, while Japan is shut for a holiday. U.S. futures were steady after the S&P 500’s biggest back-to-back advance in two months, led by cyclical stocks like energy and financials. A gauge of small caps advanced almost 2%. Verizon Communications Inc. and Coca-Cola Co. rose after better-than-estimated results, while United Airlines Holdings Inc. predicted profits ahead despite concerns about Covid-19’s threat to travel.

Ten-year Treasury yields headed back toward 1.3% as the recent rally in bonds fizzled. An auction of 20-year debt fared poorly. Cash Treasuries won’t trade in Asia because of the Japan holiday. New Zealand’s 10-year yield jumped.

Bitcoin soared after some prominent voices discussed prospects for the digital currency at a conference. Billionaire Elon Musk said his space exploration company SpaceX owns the digital token. Ark Investment Management’s Cathie Wood urged firms to consider the “explosive” Bitcoin growth.

BREAKING NEWS

SG News

Supermarket operator Sheng Siong Group said on Wednesday that its subsidiary has entered into a lease agreement to open a new store in China. In an exchange filing, the mainboard-listed company said the new store – located in the city of Kunming in Yunnan province – is expected to be operational before the end of this year. The lease agreement was signed for retail space spanning 30,772 square feet. With the new store, Sheng Siong Group would have a total of four stores in China, in addition to 63 in Singapore. The group said the new store is not expected to have a significant impact on its financial performance for the current financial year ending Dec 31.

Keppel Corp said on Wednesday that two wholly-owned subsidiaries of Keppel Offshore and Marine (O&M) have received a request for arbitration from a counter party to two contracts. In an exchange filing, Keppel Corp said the counter party to the engineering, procurement and construction contracts relating to floating production storage and offloading units has withheld around US$11.3 million due to the subsidiaries under the contracts. Keppel Corp disclosed that the counter party has also asked for a further payment of around US$31.2 million from the subsidiaries, claiming to be entitled to a price reduction under the contracts. Keppel Corp said the subsidiaries, in consultation with legal advisors, deny the counter party’s claimed right to such price reductions and “vehemently challenge” the counter party’s right to withhold payments due, as well as the “supposed right to claim such price reductions”.

In response to queries raised by the media and Securities Investors Association (Singapore), or Sias, Sembcorp Marine (Sembmarine) cited the “prolonged and severe downturn” in the offshore and marine (O&M) industry since 2015, due to the collapse in oil prices, and the impact of the Covid-19 pandemic as reasons for its earlier proposed S$1.5 billion rights issue. In a regulatory filing on Monday night, Sembmarine said that the impact of the pandemic has been protracted and could have serious consequences if it does not take action. In response to Sias’ queries on the necessity of the rights issue, the group said that the reintroduction of Covid-19 measures this year, including tighter border controls, has disrupted supply chains and exacerbated the shortage of skilled manpower.

DBS has completed Singapore’s first live bunker delivery financing pilot transaction, through an electronic bunker delivery note (BDN) between TFG Marine and Ocean Network Express, the bank said in a statement on Wednesday. The transaction, supported by the Maritime and Port Authority of Singapore (MPA), was in partnership with TFG Marine – the marine fuel supply and procurement joint venture of Swiss commodities trading giant Trafigura, Ocean Network Express and Ascenz. Ocean Network Express and Ascenz provided the underlying technology to digitalise the BDN in this pilot, the bank said. DBS said the digital BDN was part of efforts to “up the ante on the digitalisation of Singapore’s bunkering sector”, and it follows a joint agreement between DBS and the MPA in 2020 to accelerate the digitalisation and innovation of financial services and payments across Singapore’s maritime industry.

Capitaland Investment (CLI) will look at creating new products as it aims to achieve S$100 billion in funds under management (FUM) by 2024 and grow its lodging business to 160,000 units under management by 2023. In an update on its proposed restructuring, its management said at a virtual briefing on Monday that it is confident of meeting those targets, which represent an increase from S$78 billion FUM and 123,000 units in 2020. This growth will be driven by multiple engines – acquisition right of first refusal (ROFR) to CapitaLand Development’s pipeline of completed assets of up to S$7.6 billion, organic growth, CLI’s pipeline of real estate assets under management (AUM) of S$10.1 billion, as well as strategic acquisitions.

The Ascott has secured over 8,300 units across more than 30 properties in the first seven months of 2021, marking a 40 per cent growth compared to the same period a year ago, the company announced in a regulatory filing on Wednesday. With the latest figures in unit growth, the wholly-owned lodging business unit of CapitaLand has achieved its fourth consecutive year of record unit growth despite the Covid-19 pandemic, and delivered about 20 per cent compound annual growth rate since 2017. Fee income for the company is expected to increase as the planned units turn operational. Some S$20 million to S$25 million in fees is expected to be earned for every 10,000 stabilised serviced residence units. The company’s continued unit growth also puts it on track to achieve its target of 160,000 units by 2023 from the more than 128,000 units that it has globally to date.

US News

Shares of Netflix recovered from an initial dip and were up nearly 1% after the bell Tuesday after the company reported earnings that missed on the bottom line. The company’s revenue slightly beat estimates, and it confirmed speculation that it will expand more into gaming. Analysts hadn’t been expecting a blockbuster quarter when it comes to subscriber adds, expecting 1.19 million users according to Street Account. The company said it added 1.54 million users to finish the quarter with over 209 million paid memberships. “COVID has created some lumpiness in our membership growth (higher growth in 2020, slower growth this year), which is working its way through. We continue to focus on improving our service for our members and bringing them the best stories from around the world,” the company said in a letter to investors. Netflix said its revenue growth this past quarter came from an 11% increase in average paid streaming memberships and 8% growth in average revenue per membership.

Taiwan electronics manufacturer Foxconn said Wednesday that its factory in Zhengzhou — known as the world’s largest iPhone assembly plant — has not been impacted by major flooding in the city. Zhengzhou in China’s central Henan province has been hit with torrential rain. Authorities said it rained more in an hour on Tuesday than it normally would in an average month. The result has been intense flooding in the city of more than 10 million people. Over 100,000 people have been relocated to safety and 12 people have died, according to state media reports.

Johnson & Johnson said Wednesday it expects to sell $2.5 billion of its Covid-19 vaccine this year, even as concerns mount over the shot’s effectiveness against the delta variant. In releasing its second-quarter financial results, the company also reported earnings and revenue that beat Wall Street’s expectations. J&J’s pharmaceutical business, which developed the single-shot Covid vaccine, generated $12.59 billion in revenue, a 17.2% year-over-year increase. The company’s consumer unit, which makes products such as Neutrogena face wash and Listerine, generated $3.7 billion in revenue, up 13.3% from a year earlier. Its medical device unit generated $6.9 billion, a 62.7% increase. That unit was hit hard last year as the pandemic forced hospitals to postpone elective surgeries and Americans stayed home.

Coca-Cola on Wednesday reported a second-quarter revenue that surpassed 2019 levels, prompting the company to hike its full-year outlook. Shares of the company rose more than 2% in morning trading. Coke reported fiscal second-quarter net income of $2.64 billion, or 61 cents per share. That’s up from $1.78 billion, or 41 cents per share, a year earlier. Excluding items, the company earned 68 cents per share, beating the 56 cents per share expected by analysts surveyed by Refinitiv. Net sales rose 42% to $10.13 billion, topping expectations of $9.32 billion. Organic revenue, which excludes the impact of acquisitions, divestitures and foreign currency, climbed 37%. A year ago, the company reported its biggest plunge in quarterly revenue in at least three decades as lockdowns led to cratering demand. The company said Wednesday that away-from-home channels, like restaurants and movie theaters, were rebounding in some markets, like China and Nigeria.

Google on Wednesday announced several new features for Google Maps. It’s expanding a feature that shows you how crowded a transit line is to 10,000 cities across 100 countries. But it’s also testing something even more granular: the option to see which cars on a specific train are the most crowded on New York’s Long Island Railroad and for transit lines in Sydney, Australia. Both features may help you avoid more people if you’re worried about being jammed in with lots of other commuters as you return to work during the pandemic. The information will appear when you search your route. If, for example, you’re searching for trains from New York Penn Station to Long Island on the Long Island Railroad, you’ll see data on how crowded a train is and which cars have the most seats available. If it’s on a railroad that doesn’t yet offer the more granular data, you’ll still see if the train is crowded or not. The feature is rolling out now to Google Maps users, so you may not see it quite yet.

Tesla CEO Elon Musk said Tuesday that the company’s network of DC fast-charging stations for its electric vehicles, also known as the Tesla Supercharger network, will be open to other types of electric vehicles in 2021. Responding to a Tesla fan on Twitter, where Musk commands a following of 58.3 million, the CEO specifically wrote: “We’re making our Supercharger network open to other EVs later this year.” Musk did not say where in the world Tesla would make its DC fast-charging stations available for use with other electric vehicles, or which makes and models would be compatible with Tesla’s on-the-road chargers in 2021. He did say that Tesla intends to make Superchargers open to other electric vehicles in all countries, eventually.

United Airlines on Tuesday reported higher second-quarter revenue and a narrower loss thanks to a resurgence in air travel, the latest carrier to issue a brightening outlook for one of the Covid pandemic’s most battered sectors. The Chicago-based airline said that it expects to generate positive adjusted pretax income for the third and fourth quarters and that it plans to ramp up flying in response to higher travel demand. Delta Air Lines and American Airlines last week also said they have seen an improvement in bookings and financial results. United’s revenue of $5.47 billion for the three months ended June 30, was down by more than 50% from the same quarter of 2019 but up nearly 70% from the first quarter of the year as U.S. officials rolled out Covid vaccines broadly this spring, attractions reopened and more customers returned to air travel.

The world is in the early stages of another wave of Covid-19 infections and death, World Health Organization Director-General Tedros Adhanom Ghebreyesus said Wednesday. Speaking to International Olympic Committee members in Tokyo, Tedros said the global failure to share vaccines, tests and treatments is fueling a “two-track pandemic.” Countries that have adequate resources like vaccines are opening up, while others are locking down in a bid to slow the virus’ transmission. Vaccine discrepancies around the world are masking a “horrifying injustice,” he added.

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

HK Reports – Read up on our Hong Kong reports here

Webinar Of The Week

Weekly Market Outlook: HRnetGroup, SPH REIT, Fortress Minerals, Banking Monthly, Singapore Weekly

Date: 19 July 2021

For more on Market Outlook

Updates summarised in 3 minutes

The Highlights EP01: LHN Limited – Optimisier of real-estate trends

For more videos on Phillip in 3 Mins